DCD.L Regulatory News (DCD)

9 Dec 2005 09:04

Immediate Release: 09 December 2005 Digital Classics plc ("Digital Classics" or the "Company") Acquisition of Box TV Limited ("Box TV") and NBD Holdings Limited ("NBD") Digital Classics plc is pleased to announce that it has today signed agreementsto acquire two profitable companies as the first steps of a strategy totransform the Group into a television production and distribution powerhouse.These acquisitions are designed to give the Group critical mass and to exploitthe recent legislative changes in the UK TV industry. The acquisitions are: BoxTV Limited, for a total consideration of ‚£6.12 million, payable as to ‚£3.06million in cash and as to ‚£3.06 million by the issue of 382,500,000 newordinary shares of 0.1p in the Company ("Ordinary Shares"); and NBD HoldingsLimited, for a maximum total consideration of ‚£1.46 million, payable as to ‚£0.365 million in cash upon completion and as to ‚£0.73 million by the issue of91,250,000 new Ordinary Shares, plus up to a further ‚£0.365 million in cashfollowing the fulfilment of certain performance criteria (the "Acquisitions").The Acquisitions are conditional on the admission to trading on AIM of the473,750,000 new Ordinary Shares being issued in consideration for theAcquisitions. Application has been made for these 473,750,000 new OrdinaryShares to be admitted to trading on AIM and dealings are expected to commenceon 13 December 2005.The acquisitions are expected to be earnings enhancing in their first full yearof consolidation.Box TVBox TV is a profitable, independent producer of award winning drama programmessuch as `Sunday', `Gunpowder Treason and Plot' and `Sweeney Todd', the newChristmas drama starring Ray Winstone for BBC1. It is headed by Gub Neal, oneof the UK's top drama executives who previously ran the drama departments atGranada and Channel 4. The Directors believe that the structural changes to theUK TV industry brought in by the 2004 Ofcom Code of Practice provide alucrative opportunity under which UK broadcasters must now allow televisionproduction companies to exploit the ancillary and overseas rights to their ownprogrammes. These rights can be valuable assets. The Directors believe thatdrama producers are amongst the biggest beneficiaries of these legislativechanges.Digital Classics has an existing subsidiary (Digital Classics Distribution("DCD")) that distributes audio-visual content to TV channels, DVD, and newmedia and it is anticipated that the consolidation of Box TV into the DigitalClassics group will enhance the performance of DCD. Box TV has a new slate ofprogrammes in development, pre-production and production which is expected togenerate sizeable revenues. The three directors of Box TV have signed newservice agreements whereby they have agreed to work for Box TV for a minimum ofthree years, and their Ordinary Shares cannot be traded for two years.Additionally, it is anticipated that upon completion Justin Thomson-Glover, adirector of Box TV, will join the board of Digital Classics.In the 17 months ended 31 March 2005, Box TV made a loss before tax of ‚£829,195on turnover of ‚£1,566,878. In the year ended 31 October 2003, Box TV made aprofit before tax of ‚£1,420,916 on turnover of ‚£55,057,082. The value of theassets being acquired is ‚£115,153.NBDNBD Holdings Limited, which was founded 22 years ago by Nicky Davies Williams,is the holding company for its subsidiary NBD Television Limited ("NBD TV").NBD TV is a profitable distribution company operating predominantly in the rockmusic market and specialising in selling rights inter alia to popular musicprogrammes and events. NBD TV currently exploits approximately 600 hours ofprogrammes, with many new titles added each year. Its catalogue containsprogrammes featuring Paul McCartney, Elvis Presley, Live Aid, the GlastonburyFestival and many others.Digital Classics anticipates economies of scale and multiple cross-sellingopportunities in its distribution division as its existing library worksclosely together in the future with the NBD TV library. The Directors expect amuch expanded client base to follow from this acquisition. As with Box TV,NBD's directors have signed new service contracts whereby they have agreed towork for NBD for a minimum of three years, and their shares cannot be tradedfor two years. Upon completion, it is anticipated that Nicky Davies Williams, adirector of NBD, will join the board of Digital Classics.In the year ended 31 August 2005, NBD made a profit before tax of ‚£176,954 onturnover of ‚£2,964,000. The value of the assets being acquired is ‚£861,817.The cash portion of the consideration for the Acquisitions is to be fundedthrough an initial subscription for ‚£4.0 million of convertible loan notes byHighbridge Capital Management, LLC. Shareholder approval of the convertiblenature of the loan notes will be required and further information in thisregard and a notice convening an Extraordinary General Meeting will be sent toshareholders in due course.Digital Classics' Chief Executive Chris Hunt said,"I am delighted that two companies who are among the best in their fields arejoining us. This is a major step forward in creating a television productionand distribution powerhouse. These deals represent, we believe, good value forshareholders and also have the potential to add considerable commercialsynergies to the business. The potential for Box TV's dramas to be distributedinternally by the expanded group is only one such instance. These acquisitionsform part of our strategy to grow and expand our range of programming, and Iwelcome the outstanding talents in both companies who will be joining us onthis road."NBD's Director and Founder Nicky Davies Williams said,"We are excited at the prospect of working with two such outstanding companiesin their respective fields and feel that this unique combination of companiesstrengthens all our footholds in the international programming marketplace. Weenvisage great benefits to both the new group of companies and NBD's existingclients."Box TV's Director and Founder Gub Neal added,"It's a great opportunity for Box TV Ltd to be joining the forces of bothDigital Classics and NBD, at a time when the exploitation of programming rightshas become a truly valuable and exciting prospect. The combined strengths ofall three of these companies will give real muscle in the game ahead andpresents an outstanding opening for real diversification and growth in theenhanced value of international TV rights."For further information please contact,Chris Hunt, Chief ExecutiveDigital Classics plcTel. 020 7636 1400Ben Simons / Adam ReynoldsHansard CommunicationsTel. 020 7245 1100ENDDIGITAL CLASSICS PLC