HNG.L Regulatory News (HNG)

TLA Worldwide plc

("TLA" or the "Company")

Acquisition of the business and assets of Peter E. Greenberg and Associates, Ltd

Placing of 10,869,566 new Ordinary Shares at price of 23 pence per share

and

Notice of General Meeting

The Board of TLA today announces that it has conditionally agreed to acquire substantially all of the business and assets of Peter E. Greenberg and Associates, Ltd ("PEG").

The Company also announces that it has conditionally placed 10,869,566 new Ordinary Shares in the Company at a price of 23p per share ("Placing Price"), raising £2.5 million before expenses. The proceeds of the Placing will be used to fund the initial cash consideration payable under the Acquisition Agreement and to pay associated transaction costs.

The Placing is conditional, inter alia, upon resolutions being passed at the General Meeting of the Company to be held on 2 November 2012 to give the Directors of the Company the necessary share capital authorities to effect the Placing. The Placing Shares are expected to be admitted to trading on AIM on or around 5 November 2012.

Background to and reasons for the Acquisition

The Company was admitted to trading on AIM on 8 December 2011 and acquired all or substantially all of the business and assets of Legacy and The Agency. The purchase of the business and assets of Legacy and The Agency was the Board's first step in achieving the Company's aim of becoming the pre-eminent, fully-integrated representation and marketing services provider to the baseball industry and over time, to other sports.

The Company has now identified a further acquisition and has, through its subsidiary PEGA, conditionally agreed, pursuant to the terms of the Acquisition Agreement, to acquire substantially all of the business and assets of PEG. 

Strategic rationale

PEG has a presence in the Latin American baseball market and Latin America is a key strategic area for MLB clubs and for the Company.

§ 23.5 per cent. of all MLB players are Latin American;

§ PEG key player markets, the Dominican Republic and Venezuela, represent 10.2 per cent. and 7.3 per cent. of all MLB players respectively; and

§ Latin American MLB baseball players are amongst the highest paid in the sport: Alex Rodriguez ($275 million 10 year contract), Albert Pujols ($240 million 10 year contract), Johan Santana ($137.5 million 6 year contract).

As a result of the Acquisition, TLA will become a leader in the representation and recruitment of Latin American baseball players. In addition, the Acquisition will increase TLA's baseball clients by 63 to 166, moving TLA to number one position by total players. The Acquisition will provide TLA with a presence in the East Coast of the United States, complementing its West Coast operation. It will also provide TLA with a stronger presence in Japan, the third largest baseball player market behind North and Latin America. In addition, PEG has a highly respected management team, bringing depth and expertise to TLA's baseball offering.

Financial rationale for the Acquisition

§ Increases TLA contracted revenues by approximately $6 million;

§ Delivers future organic growth through the profile of the contracted revenues;

§ Expected to be earnings enhancing in first full year post Acquisition;

§ PEG's strong MiLB roster significantly increases TLA's pipeline of future MLB players; and

§ Creates opportunities for cost savings post integration.

Information on PEG

PEG was established in July 1997, when brothers Peter and Edward Greenberg recognised that by combining their knowledge and experience in sports, marketing, banking and law they could form a successful athlete representation firm. Fluent in Spanish, they realized that there was an immediate need and an undeveloped market for Spanish speaking sports agents. PEG quickly developed its niche in the market, with a particular focus on Venezuela and the Dominican Republic. PEG also developed a foothold in the Japanese market. 

PEG is based in New York with seven employees. Its roster includes 17 MLB players, including 5 All Stars, 41 MiLB clients and 5 players in Japanese baseball.

For the financial year ended 31 December 2011 PEG generated revenues of $4.024 million, EBIT of $161,492 and a net loss of $65,819. 

Historically the principals of PEG were substantially remunerated through discretionary drawings. The Company has calculated an adjusted EBIT to reflect the remuneration that the same individuals are entitled to subsequent to the Acquisition. On this basis the adjusted EBIT of PEG for the year ended 31 December 2011 is $1.362 million.

At the end of 2011 two of PEG's high earning players retired which will have an impact on PEG's revenues for the current year. PEG has won new clients to replace them and their contribution will be reflected in 2013.

Terms of the Acquisition

Pursuant to the terms of the Acquisition Agreement, the Company's subsidiary, PEGA, has conditionally agreed to purchase substantially all of the business and assets of PEG for the following consideration:

§ $3,059,700 (approximately £1,901,380);

§ $1,311,300 (approximately £814,877) to be satisfied by the issue of the PEGA Consideration Shares upon completion of the Acquisition (which can, in accordance with the terms of the Exchange Agreement, be exchanged for 3,326,029 Ordinary Shares in the capital of the Company, at a value of 24.5 pence per share, being the average price at which the Company's Ordinary Shares were traded on AIM during the period of seven (7) days ending at the close of trading on 16 October 2012);

§ $165,000 in cash payable on July 31, 2013; and

§ up to $7,066,286 (approximately £4,391,179) payable to PEG in five contingent earn-out payments following the end of each of the five years following completion of the Acquisition.

PEG's entitlement to the contingent earn-out payments will be dependent on the achievement of a certain level of EBIT for PEG as set out in the circular to Shareholders posted today.

These earn-out payments can be earned if either the individual annual EBIT targets or the cumulative EBIT target are met or exceeded. If the relevant PEG EBIT targets are not achieved such earn-out payments will be reduced in accordance with the terms of the Acquisition Agreement by reference to the actual EBIT level achieved.

PEGA shall have the option of paying up to thirty per cent. of any earn-out payment by issuing PEGA Deferred Consideration Shares which the Vendor Shareholders will have the option to exchange pursuant to the terms of the Exchange Agreement into Ordinary Shares in the Company at a price per share being the greater of (i) the Placing Price or (ii) the average closing price on AIM of one Ordinary Share of the Company over the seven day trading period immediately after the date of the exchange notice. 

Any Ordinary Shares allotted and issued to the Vendor Shareholders pursuant to the terms of the Exchange Agreement will be subject to a 36 month lock-in period, such period to commence on the date on which the PEGA Consideration Shares and/or PEGA Deferred Consideration Shares are issued. In addition, the Vendor Shareholders have agreed that in order to preserve an orderly market in the Ordinary Shares in the capital of the Company, any transfer of Ordinary Shares held by them will be effect through Cenkos or the Company's broker from time to time in such orderly manner as Cenkos or the Company's broker shall reasonably determine having regard to the desirability of maintaining an orderly market.

The Placing

The Company has conditionally raised £2.5 million (before expenses) through the proposed issue of the Placing Shares at the Placing Price. The Placing Shares will represent 8.9 per cent. of the Company's Enlarged Share Capital immediately following completion of the Placing.

The Placing Agreement

Pursuant to the terms of the Placing Agreement, Cenkos has conditionally agreed to use its reasonable endeavours, as agent for the Company, to place the Placing Shares with certain institutional and other investors at the Placing Price. The Placing Agreement is conditional upon, inter alia, the Resolutions being duly passed at the General Meeting and Admission becoming effective on or before 8.00 a.m. on 5 November 2012 (or such later time and/or date as the Company and Cenkos may agree, but in any event by no later than 8.00 a.m. on 30 November 2012).

The Placing Agreement contains warranties from the Company in favour of Cenkos in relation to, inter alia, the accuracy of the information in the circular, the fact that the Group has and will have sufficient working capital for its present requirements, that is for at least 12 months following Admission, and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify Cenkos in relation to certain liabilities it may incur in respect of the Placing. Cenkos has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a material breach of the warranties.

Settlement and dealings

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will occur on 5 November 2012.

The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares including the right to receive dividends and other distributions declared following Admission.

Use of Proceeds

The Company has conditionally raised approximately £2.07 million (after expenses) pursuant to the Placing. The proceeds of the Placing are intended to be used to fund the initial cash consideration payable under the Acquisition Agreement and to pay associated transaction costs.

Current Trading and prospects of the Company

On10 September 2012 the Company announced its interim results, the highlights of which are set out below. The full statement is available on the Company's website www.tlaww-plc.com.

§ Adjusted EBITDA of $3.5 million (£2.2 million)2, EBITDA of $3.3 million (£2.1 million)2

§ Cash balance at 30 June 2012 of $2.4 million ($3.1 million at 31 December 2011)

§ Contracted revenue of $32 million at 31 July 2012

§ 93 per cent. of full year market revenue expectations contracted

§ Adjusted operating margin of 46 per cent.

§ Diluted earnings per share of 0.37 cents (0.24p) 2

§ Adjusted diluted earnings per share3 of 2.5 cents (1.6p)2

§ Statutory operating profit of $1.2 million (£0.8 million)2 and profit before tax of $0.7 million (£0.4 million)2

Recommendation

The Directors consider that the Acquisition and the Placing are in the best interests of the Company and Shareholders as a whole. Accordingly the Directors unanimously recommend Shareholders to vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings amounting, in aggregate, to 3,060,566 Ordinary Shares, representing approximately 4.8 per cent. of the Company's existing issued ordinary share capital.

A copy of the circular and notice of General Meeting has been sent to the Company's shareholder today and will be available on the Company's website: www.tlaww-plc.com. Definitions contained within this announcement have the same meaning as those defined within the circular

Commenting on the Acquisition and Placing, Mike Principe, CEO, said,

"We are delighted to have made this strategic acquisition, which cements our position as a market leader in baseball representation. PEG will provide us with a greater presence in Latin America, and secondarily, Japan, as well as a platform to grow wider in the sports marketing sector. We welcome PEG to TLA and are excited as to our future growth plans."

For further information

Camilla Hume