ELE.L Regulatory News (ELE)

26 Nov 2007 07:00

Electric Word PLC26 November 2007 26 November 2007 Electric Word plc ELECTRIC WORD RAISES STAKE IN MYCHILD TO 50.1% Electric Word plc, the specialist information publisher, announced today theacquisition of a second tranche of shares in MyChild Limited, raising its stakefrom 10% to a majority 50.1%. MyChild is highly complementary to Electric Word's education portfolio andpublishes a magazine aimed at supporting parents with their children's educationby helping them to understand both how schools work and what they can do at hometo support their children's development. Revenue is currently very largelyderived from approximately 18,000 magazine subscriptions, supplemented byadvertising and some commerce revenue from the sale of third-party products. Inthe year to 31 May 2007 MyChild recorded a loss of £88,462 on turnover of£706,528 (unaudited). Net assets at 31 May 2007 were £(624,615). Electric Word subscribed £137,500 in cash for new shares in August 2007 toacquire a 10% equity stake in MyChild and has now exercised its option to pay£512,500 to acquire a shareholding of 40.1% from existing MyChild shareholdersto increase its shareholding to 50.1% and has agreed to lend a maximum of anadditional £400,000 to MyChild to enable it to repay existing shareholder loans.Of the total second tranche investment of £912,500, payment of £400,000 has beenmade now, with £512,500 being deferred to 31st May 2008. This second tranche investment in MyChild will be funded by a loan of up to£600,000 from Sussex Research Ltd, a related party of Electric Word. The loan,which is unsecured, is due to be repaid by 31st May 2008 with interest payableat a rate of 2.5% above the Bank of England base rate. Electric Word has the option to acquire the remaining 49.9% of MyChild Ltd,which would take its shareholding to 100%, at any time from 1st December 2008 to1st March 2009 with the valuation fixed at a multiple of six times EBITDA forthe year to 30th November 2008, less an adjustment for movement in net assets,and subject to an overall cap. Sussex Research Ltd, through its subsidiary Sussex Trading Ltd, holds 23,036,364ordinary shares in Electric Word, representing 16.18% of the total shares inissue. In addition, Stuart Newton, who ultimately controls Sussex Research Ltd,also personally holds 1,020,000 shares in Electric Word, representing 0.72% ofthe total shares in issue. As such, under the AIM Rules for Companies, Sussex Research Limited and SussexTrading Ltd are treated as a related party of Electric Word. The Directors ofElectric Word consider, having consulted with Panmure Gordon (Broking) Limited,its nominated adviser, that the terms of the Sussex Research Ltd loan are fairand reasonable insofar as its shareholders are concerned. Julian Turner, Electric Word's Chief Executive, commented: "Increasing our interest in MyChild to a majority holding, with the support ofour largest shareholder, is an important strategic move as we push further intothe parenting end of the education market - an area highly complementary to ourprofessional education publishing division. Education remains a driving issuefor parents as well as the Government. There is a significant opportunity tosupport parents in the educational development of their children and MyChildprovides a good entry point for us in this market." - ends - Julian Turner, Chief ExecutiveElectric Word 020 7954 3470 Tim Spratt / Helen ThomasFinancial Dynamics 020 7831 3113 Andrew Potts 020 7459 3600Panmure Gordon Further information: In addition to the shares in Electric Word held by Sussex Trading Company Ltdand Stuart Newton as described above, Sussex Trading Company Limited holds£987,500 in convertible preference shares issued as part consideration for theCompany's acquisition of SportBusiness Group Ltd in January 2006. Electric Wordcurrently manages three education magazines published by Special EducationPublishing Limited (a company owned by Sussex Research Ltd), and has an optionto acquire Special Education Publishing Limited from Sussex Research Limited asannounced on 12 September 2007. This information is provided by RNS The company news service from the London Stock Exchange