2 Feb 2009 07:00
UBC Media Group plc
("UBC" or the "Company")
UBC announces sale of Commercial Division for £9m cash plus deferred consideration.
UBC, the supplier of audio content and broadcast data software to the radio industry, is pleased to announce that it has entered into an agreement with Global Traffic Network, Inc. ("GTN") for the sale of its Commercial Division (the "Sale"). GTN is a Nasdaq listed leading provider of custom traffic and news reports to radio and television stations outside the US.
Further to the Company's announcements on 8 May 2008, 15 July 2008, 3 October 2008 and 20 October 2008, UBC has entered into a conditional Sale and Purchase Agreement with GTN for the sale of the Commercial Division for a cash consideration of £9 million plus deferred consideration if certain earn out revenue milestones are met in each of the three calendar years from January 1 2009. The Sale is expected to take place on 1 March 2009 ("Completion").
Under the earn out, UBC will be entitled to £1 million if the acquired business generates calendar year 2009 revenue of at least £11.0 million and will be entitled to a higher payment amount, up to a maximum of £5.5 million, based on a graduated schedule of 2009 revenue ranging from £11 million to £13.6 million. For 2010 and 2011, UBC will be entitled to receive 50% of the amount by which revenue from the acquired business exceeds £12 million or £12.5 million, respectively.
The Commercial Division generated revenues of £11.53 million in the financial year to March 2008 and £4.64million in the first six months of this financial year. Since the end of the first half of this year, UBC has signed a 2 year deal with Global Radio to supply traffic and travel bulletins for the entire Global Radio group, increasing the size of the audience delivered to advertisers by the Commercial Division by 32%.
The Board believe that the cash offer received for the Commercial Division represents a full valuation of the business in the current trading environment, given the Commercial Divisions' decline in revenues and the prospects for commercial radio advertising. In addition the board believe that the Commercial Division will benefit from being part of a larger group with operations in a number of major international markets and that the prospect of a recovery in the advertising market to at least the levels of last year and the impact of the addition of Global Radio group to the network are fully reflected in the earn-out provisions which now stretch forward to the end of 2011.
The sale of the Commercial Division constitutes a disposal resulting in a fundamental change of business under the AIM Rules and therefore the Company is intending to send a circular to shareholders shortly, convening a general meeting of the Company for the purpose of seeking the approval of shareholders for the Sale. Following the disposal the Company will retain its Programme Production Division and Data & Interactive Division and will not be considered to be an investing company under the AIM Rules.
Following Completion the directors believe that, in the current economic climate, there are significant opportunities to replace the earnings of the Commercial Division by making carefully targeted acquisitions to complement the Groups remaining divisions, creating consolidation benefits. The board intends to explore a strategy which will balance a return of capital to investors against acquisition and consolidation opportunities.
As a result of the transaction certain arrangements have been entered into with Simon Cole and John Quinn which are considered to be related party transactions for the purposes of Rule 13 of the AIM Rules for Companies and the following constitutes the summary of the arrangements required by that rule.
In view of Simon Cole's personal stature in the radio industry GTN have taken the unusual step of requiring as a condition for it to proceed with the Sale, that Simon Cole enters into personal three year non-compete and non-solicitation restrictions for which the Company will pay to Simon the sum of £30,000 in consideration of him entering into the restrictions. In addition UBC has also agreed to discharge any legal fees Simon may incur in reasonably defending any claims which may be bought under the restrictions to a maximum sum of £200,000.
John Quinn, the Company's COO, will move across to GTN with the Commercial Division. GTN have made it clear that John Quinn was crucial to the successful Completion of the transaction and in order to properly incentivise him, at the beginning of 2008, the remuneration committee decided to pay John a cash bonus upon Completion. This bonus is equivalent to one year's basic salary plus the average of his annual performance-related bonus for the two financial years ending 31 March 2009 which is not expected to exceed the sum of £160,000.
The Directors (other than Simon Cole and John Quinn), having consulted with the Company's nominated adviser, consider the terms of these arrangements to be fair and reasonable insofar as Shareholders are concerned.
Simon Cole, Chief Executive of UBC commented:
""The talented Commercial team at UBC has spent 13 years building up a market leading networking business in the U.K. and now it is time for that to be part of a bigger international operation. I'm hugely grateful to every member of the team for the contribution they have made to delivering value for UBC's shareholders and delighted to be working with them and Global Traffic Network to take the business to a new level. The U.K. radio market is developing very fast as consolidation takes hold and I am very confident that GTN can look forward to maintaining and building the strong business we have developed here".
At UBC, we now need to look to the future as a cash-rich and market leading radio services company incorporating profitable production and interactive businesses. I believe that our position affords us enormous opportunities at this time."
William L. Yde III, Chairman, CEO and President of GTN commented:
"We are extremely excited about the acquisition, as it will dramatically increase our presence in the United Kingdom, adding approximately 230 radio stations and over 700,000 radio advertising spots per year. The stations currently serviced by the commercial division of UBC have a non-duplicated cume of approximately 21.5 million listeners weekly, which is greater than our combined reach in Australia and Canada. We have always seen the United Kingdom as having huge potential for us and we believe this acquisition is the best strategy to take advantage of that opportunity. Although we are paying a premium for UBC's commercial division, we see the overall initial consideration as a modest investment given the footprint of the network. We look forward to working with the management of the commercial division as we move forward with the execution of our growth strategy in the U.K ".
Ends
Enquiries
Simon Cole, CEO, UBC Media Group plc Tel: 020 7453 1600
Mark Percy or Sarah Jacobs, Seymour Pierce Limited Tel: 020 7107 8000
Notes to Editors
About UBC Media Group
UBC is quoted on the London Stock Exchange's AIM market. UBC is the market leader in the supply of audio content to the radio industry in the UK. In addition to the entertainment, traffic & travel and national news services provided to commercial radio, the Group is the largest independent producer of radio programming for the BBC. It is part of the MXR Digital Radio Multiplex consortium.
www.ubcmedia.com
About Global Traffic Network Inc.
Global Traffic Network, Inc. (Nasdaq: GNET) is a leading provider of custom traffic and news reports to radio and television stations outside the U.S. The Company operates the largest traffic and news network in Australia, operates traffic networks in eight Canadian markets and has recently commenced operations in the United Kingdom. In exchange for providing custom traffic and news reports, television and radio stations provide Global Traffic Network with commercial airtime inventory that the Company sells to advertisers. As a result, radio and television stations incur no out-of-pocket costs when contracting to use Global Traffic Network's services. For more information, visit the Company's website at www.globaltrafficnetwork.com