Entertainment One Regulatory News (ETO)

Date: 11 April 2019On behalf of: Entertainment One Ltd.

(the "Company", "eOne", "Entertainment One" or the "Group")

Embargoed until: Immediate release

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND NOT FOR RELEASE, PUBLICATION, DISTRIBUTION OR FORWARDING, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, NEW ZEALAND, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY PROVINCE OR TERRITORY OF CANADA OR ANY JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION IS UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

Entertainment One Ltd. ("eOne" or the "Company")

Acquisition of Audio Network Limited

· eOne to acquire 100% of UK-based Audio Network Limited ("Audio Network"), one of the world's largest independent creators and publishers of original high-quality music for use in film, television, advertising and digital media, with streamlined owned rights (the "Acquisition")

· The Acquisition enhances eOne's presence in music, a rapidly growing sector, with attractive growth that is complementary to eOne's music, film, television and family brands businesses

· Audio Network has an attractive financial profile, including revenue of £29m (growing 13% versus prior year), reported EBITDA of £11m (reported EBITDA margin of 35%) and £10m profit before tax, for the twelve-month period ended 30 June 2018 with total gross assets of £18m as of 30 June 2018

· Recurring and predictable cash flow from subscription revenue and royalty collections support strong free cash flow conversion of approximately 90% for the twelve-month period ended 30 June 2018

· The combined business is expected to create scale, synergies and revenue opportunities across eOne

· Key management, including co-founder Andrew Sunnucks and CEO Robb Smith, will join the senior management team of eOne's Music business, led by Chris Taylor, and continue to drive execution of Audio Network's strategy and day-to-day operations

· Enterprise value of £165m on a cash-free and debt-free basis, represents a multiple of 15x Audio Network's last 12 months' reported EBITDA of £11m as of 30 June 2018

· Aggregate consideration of £178m comprised of approximately £165m acquisition of Audio Network and £13m acquisition of cash and cash equivalents net of working capital items, interest, and other transaction adjustments, acquired at completion which is expected on or before 18 April 2019 ("Completion")

· Cash consideration to be partially financed by the proceeds of the placing announced by Company today (the "Placing") with the remainder expected to be financed by a debt financing and the issue of Common Shares in eOne to Key Management

· Acquisition is targeted to be EPS accretive in the current financial year ending 31 March 2020, including revenue opportunities and cost synergies

· Proforma leverage for the Acquisition is targeted at approximately 1.9x as of 31 March 2019, reducing in subsequent years

Introduction

eOne today announces that Entertainment One UK Holdings Ltd, a wholly owned indirect subsidiary of the Company, has entered into a share purchase agreement to acquire 100% of the shares of Audio Network for an aggregate consideration of approximately £178m, including cash and cash equivalents net of working capital items, interest, and other transaction adjustments, acquired at Completion, of approximately £13m.

The consideration will be satisfied by the payment of approximately £169m in cash and by the issue of eOne common shares (the "Subscription Shares") to key management shareholders ("Key Management") of Audio Network on Completion, equating to approximately £9m.

Key Management is restricted from disposing of any of the Subscription Shares for twelve months from the date of Completion (the "Lock-In Period"). This lock-in undertaking is subject to customary exceptions and a material reduction in share price. The sale of any remaining Subscription Shares during the Lock-In Period (under an exception) or for twelve months following the Lock-In Period is subject to orderly market arrangements.

The total fundraise of approximately £191m will be used to fund the aggregate consideration of £178m for the Acquisition, Acquisition fees and expenses, provides balance sheet flexibility for future bolt on acquisitions and general corporate purposes. The fundraise will be financed by the proceeds of the Placing announced today to raise approximately £130m before expenses, a £52m term loan provided by JPMorgan Chase, N.A. and the issue of the Subscription Shares equating to approximately £9m. The results of the Placing are expected to be announced on 12 April 2019 and shares allotted under the Placing are expected to be admitted on 16 April 2019. Pro forma leverage for the Acquisition is targeted at approximately 1.9x as of 31 March 2019, reducing in subsequent years.

The Acquisition is not conditional upon the completion of the Placing or the debt financing. If the proceeds of the Placing are received but the Acquisition does not complete, the directors of the Company will consider, in the best interests of Shareholders as a whole, whether to retain the proceeds of the Placing to be utilised for other investment opportunities and/or for the repayment of existing debt, or to return some or all of the proceeds pro rata to Shareholders (including those who did not participate in the Placing), in the most efficient manner from a taxation perspective, in accordance with applicable law.

Background to the Acquisition and description of Audio Network

Audio Network is a UK based independent creator and publisher of original high quality music for use in film, television, advertising and digital media, with streamlined owned rights. It derives revenue from sync licensing, approximately 60% of which is annual subscription based revenue, and publishing royalties, generating highly recurring and predictable cash flow. Audio Network is creatively led and data-informed, mixing human curation and music supervision with automation to build search and discovery capabilities. Its premium, diversified music catalogue of over 150,000 owned tracks and over 16 new album releases per month, is monetised by its predictive data informed sales model and advanced content management system. Audio Network also benefits from its longstanding partnerships with more than 1,000 known and emerging artists and renowned composers, and impressive roster of large high-profile companies with over 30,000 customers across 130 countries. Audio Network has approximately 140 employees across 9 offices worldwide.

Strategic rationale

The Board believes that the Acquisition is in line with the Company's strategy to create, own and control high quality content. The Acquisition enhances eOne's presence in music, a fast-growing sector with attractive growth that is complementary to eOne's existing music, film and television businesses. The Acquisition brings together two talent-focused organisations that share a commitment to being artist-first and platform agnostic.

The combined business is expected to create scale, synergies and revenue opportunities across eOne. With nine offices and teams around the world, Audio Network brings longstanding partnerships with more than 1,000 artists and composers to eOne to benefit from the Group's record label services and extensive film, television and brand capabilities. The integration of Audio Network further generates sync placement opportunities for eOne's commercial artists. Additional revenue opportunities including developing sync and royalty streams through eOne's film, television and family brands businesses.

Under the leadership of eOne's Global President of Music, Chris Taylor, co-founder Andrew Sunnucks will continue in his role as Chairman of Audio Network, and the existing executive management team under CEO Robb Smith will remain in place.

Financial benefits

The Board believes that the Acquisition will be financially beneficial to the Company and will add value for Shareholders through:

· strengthening the Company's growth, margin and free cash flow profile by scaling eOne's Music business combined with Audio Network to annual revenue exceeding £75m proforma as of 31 March 2018

· generating additional revenue opportunities and cost synergies through integration of Audio Network with eOne; and

· Acquisition is targeted to be EPS accretive in the current financial year end 31 March 2020, including revenue opportunities and cost synergies

Commenting on the Acquisition, eOne's Group Chief Executive, Darren Throop, said:

"As we continue to unlock the power and value of creativity for artists, we are very pleased to welcome Audio Network, whose passionate management team and ambition align with ours. The combination of eOne's front-end commercial artist catalogue and Audio Network's premium diversified music catalogue creates a one-stop solution for business customers seeking high-quality music"

Note to the editor

A team led by Rebecca Bothamley and Robert Hamill at Mayer Brown LLP with support from Osler, Hoskin & Harcourt LLP provided legal counsel on the transaction for eOne. J.P. Morgan Chase Bank, N.A. provided financing for the transaction and Milbank LLP provided legal counsel on the financing for eOne. Audio Network Limited was advised by Jefferies International Limited on the transaction with Taylor Wessing LLP providing legal counsel.

Presentation and dial-in details

A conference call to investors and analysts will be held at 17:30 BST on 11 April 2019. Dial-in access details for the call are available from the Company. The slides accompanying the presentation will be available at www.entertainmentone.com shortly before the start of the presentation. A replay will be available until 18 April 2019 at www.incommuk.com/customers/entertainmentone, Access Code: 363578.

Contacts

About eOne

Entertainment One Ltd. (LSE:ETO) is a global independent studio that specialises in the development, acquisition, production, financing, distribution and sales of entertainment content. The Company's diversified expertise spans across film, television and music production and sales; family programming, merchandising and licensing; digital content; and live entertainment. Through its global reach and expansive scale, powered by deep local market knowledge, the Company delivers the best content to the world.

Entertainment One's robust network includes international feature film distribution company Sierra/Affinity; Amblin Partners with DreamWorks Studios, Participant Media, and Reliance Entertainment; Makeready with Brad Weston; unscripted television production companies Whizz Kid Entertainment and Renegade 83; live entertainment leaders Round Room Entertainment; world-class music labels Dualtone Music Group and Last Gang; and award-winning emerging content and technology studio Secret Location.

IMPORTANT NOTICE:

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of MAR) prior to its release as part of this announcement. The person responsible for arranging release of this information on behalf of eOne is Edward Parry.

In addition, market soundings (as defined in MAR) were taken in respect of the Placing and the Acquisition with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this announcement and the separate announcement in respect of the Placing being made by the Company today. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which these materials are released, published, distributed or forwarded should inform themselves about and observe such restrictions. This announcement is for information purposes only and is not intended to, and does not form part of any invitation to purchase, subscribe for, or otherwise acquire or dispose of, or any solicitation to purchase or subscribe for or otherwise acquire or dispose of any securities in any jurisdiction. The information contained herein is not for release, publication, distribution or forwarding, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia). Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdiction. This announcement does not contain or constitute an offer to sell or the solicitation of an offer to purchase securities to any person with a registered address in, or who is resident in, Australia, New Zealand, Japan, the Republic of South Africa or in any jurisdiction in which such an offer or solicitation is unlawful. None of the securities referred to herein have been or will be registered under the relevant laws of any state, province or territory of Australia, New Zealand, Japan or the Republic of South Africa. Subject to certain limited exceptions, none of these materials will be released, published, distributed or forwarded in or into Australia, New Zealand, Japan or the Republic of South Africa.

This announcement does not contain or constitute an offer to sell or the solicitation of an offer to purchase securities in any province or territory of Canada. This announcement does not constitute an "offering memorandum" within the meaning of the securities laws of any province or territory of Canada.

This announcement does not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in the United States. The securities referred to herein have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or jurisdiction of the United States, and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from, or transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of any securities in the United States. None of the Placing Shares, the Subscription Shares, this announcement or any other document connected with the Acquisition or the Placing has been or will be approved or disapproved by the United States Securities and Exchange Commission or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, and none of the foregoing authorities or any securities commission has passed upon or endorsed the merits of the offering of the Placing Shares or the Subscription Shares or the accuracy or adequacy of this announcement or any other document connected with the Acquisition or the Placing. Any representation to the contrary is a criminal offence in the United States.

J.P. Morgan Securities plc (which operates its investment banking activities in the United Kingdom as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove") and Investec Bank plc ("Investec") (together, the "Bookrunners") are each authorised by the PRA and regulated in the United Kingdom by the PRA and the FCA. Canaccord Genuity Limited ("Canaccord", and together with the Bookrunners, the "Banks") is regulated in the United Kingdom by the FCA.

Each of the Banks is acting exclusively for the Company and no one else in connection with the Placing and, in the case of J.P. Morgan Cazenove, as sponsor in connection with the Acquisition, and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for providing advice in relation to the Placing, the Acquisition or any matters, transactions or arrangements referred to in this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on the Banks by FSMA or the regulatory regime established thereunder, none of the Banks accepts any responsibility whatsoever or makes any representation or warranty, express or implied, for the contents of this announcement including its accuracy, completeness or verification or for any statement made or purported to be made by it, or on its behalf, in connection with the Company, the Placing Shares, the Subscription Shares, the Acquisition or the Placing and nothing in this announcement shall be read as a promise or representation in this respect whether as to the past or future. The Banks accordingly disclaim all and any liability whatsoever arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this announcement or any such statement. 

Jefferies International Limited ("Jefferies"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for Audio Network Limited and no one else in connection with the matters set out in this announcement. In connection with such matters, Jefferies will not regard any other person as their client, nor and will not be responsible to anyone other person than Audio Network Limited for providing the protections afforded to clients of Jefferies or for providing advice in relation to the contents of this announcement or any other matter referred to herein. Neither Jefferies nor any of its subsidiaries, affiliates or branches owes or accepts any duty, liability or responsibility whatsoever (whether direct, indirect, consequential, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Jefferies in connection with this announcement, any statement contained herein or otherwise.

This announcement has been issued by, and is the sole responsibility of eOne. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its accuracy or completeness. The information in this announcement is subject to change.

Recipients of this announcement should conduct their own investigation, evaluation and analysis of the business, data and property described in this announcement. This announcement does not constitute a recommendation concerning any investor's options with respect to any matters disclosed herein. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each shareholder or prospective investor should consult with his or her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice. 

Neither the contents of eOne's website nor any website accessible by hyperlinks on eOne's website is incorporated in, or forms part of, this announcement.

This announcement contains "forward-looking statements" which includes all statements other than statements of historical fact, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this announcement. None of the Company, J.P. Morgan Cazenove and Investec, or their respective directors, officers, employees, agents, affiliates and advisers, or any other party undertakes or is under any duty to update this announcement or to correct any inaccuracies in any such information which may become apparent or to provide you with any additional information, other than any requirements that the Company may have under applicable law or the Listing Rules, the Prospectus Rules, the Disclosure Guidance and Transparency Rules or MAR. To the fullest extent permissible by law, such persons disclaim all and any responsibility or liability, whether arising in tort, contract or otherwise, which they might otherwise have in respect of this announcement. The information in this announcement is subject to change without notice.

DEFINITIONS AND INTERPRETATION