Jaywing Regulatory News (JWNG)

3 Oct 2006 07:01

Seashell II Limited03 October 2006 Not for release, publication or distribution, in whole or in part, in or intothe United States, Australia, Ireland, Canada or Japan SEASHELL II LIMITED ANNOUNCES PROPOSALS TO MERGE WITH DIGITAL MARKETING GROUPPLC AND RAISE £7.8 MILLION THROUGH A PLACING Highlights • Seashell II today announces proposals to merge with Digital Marketing Group plc • Digital Marketing Group plc will be a digital direct marketing business, based in the UK and focused on both "online" and "offline" direct marketing • Digital Marketing Group plc has conditionally agreed to acquire 100 per cent. of both HSM Limited and Scope Creative Marketing Limited (trading as Dig For Fire) • Seashell II had cash of approximately £2.7 million as at 2 October 2006. Prior to the merger Seashell II plans to raise an additional £7.8 million (before expenses) via a placing to provide additional funds for the growth of the business • The transaction will provide Digital Marketing Group plc with financial resources to expand the Enlarged Group's operations both organically and through further acquisitions. Lord Ashcroft, KCMG, Chairman of Seashell II Limited commented: "This transaction is the culmination of a range of discussions that followed theflotation of Seashell II in June 2005. The management of the Enlarged Group hashad considerable success in the marketing sector previously and has identifiedopportunities in this market. We believe that this is an attractive transactionfor Seashell II Shareholders." Commenting on today's announcement, Ben Langdon, proposed Chief Executive ofDigital Marketing Group plc, said: "The merger with Seashell II provides Digital Marketing Group plc with asignificant shareholder base and a platform from which to seek to establishitself as a leading digital direct marketing group. Its financial firepower hasalready enabled us to enter into contracts to make our two first strategicacquisitions which will form the cornerstones of this growing business. We aredelighted that both HSM and Dig For Fire share our vision for building anintegrated digital direct marketing group. Opportunities in the digital spaceare significant as advertisers continue to shift their spend towards "online"direct marketing and we look forward to capturing these opportunities." Gary Stevens, Chief Executive of HSM, commented: "Digital marketing is at the forefront of our business today and I believe thatthere is significant commercial value to be gained by participating in aspecialist digital direct marketing group. Our proven success combining "online"direct marketing with telemarketing will be further enhanced with complementaryskills in database management, "offline" direct marketing and digital mediaplanning and buying. I am delighted that Digital Marketing Group plc shares thesame vision to develop such an integrated business and look forward to making ithappen for the benefits of our clients." Charles Buddery, Chief Executive of Dig For Fire, added: "The proposal to join Digital Marketing Group plc is a great opportunity for usto broaden our product offering and further enhance our existing digitalcapabilities via the integration of our "offline" direct marketing skills ofstrategic and brand planning, direct response advertising and direct mail withHSM's "online" skills of digital strategy and planning and telemarketing. We arevery excited at the prospect of joining Digital Marketing Group plc at such aninteresting time of change for the advertising industry." This summary should be read in conjunction with the full text of theannouncement included below. For further information please contact: Ben Langdon, Digital Marketing Group plc - 07711 748 117Noemie de Andia, Libby Young, Smithfield Consultants - 020 7360 4900Cenkos Securities - 020 7397 8900Angela Entwistle, Seashell II - 020 7248 6700 SEASHELL II LIMITED PROPOSALS TO MERGE WITH DIGITAL MARKETING GROUP PLC, ACQUIRE BOTH HSM LIMITEDAND SCOPE CREATIVE MARKETING LIMITED TO CREATE THE ENLARGED GROUP AND RAISE £7.8MILLION THROUGH A PLACING Introduction The directors of Seashell II today announce that they have identified a mergerwith Digital Marketing Group plc and the acquisition of HSM and Scope as anattractive investment opportunity for Seashell II. Conditional agreements have been entered into to acquire HSM and Scope (the "Acquisitions") and to combine these with the financial resources of Seashell IIunder a merged company, Digital Marketing Group plc, and to seek admission ofDigital Marketing Group plc's shares to AIM. A circular to Seashell II Shareholders and an admission document prepared byDigital Marketing Group plc in respect of Admission, which, together, providefull details of the proposals, are being despatched to Seashell II Shareholdersshortly. The Merger It has been decided that the ultimate holding company of the Enlarged Groupshould be a public limited company incorporated in England and Wales. A newcompany, Digital Marketing Group plc, has therefore been formed. It is proposedthat Seashell II will merge with Digital Marketing Group plc under the laws ofBelize. Digital Marketing Group plc will effect the Acquisitions and is to seekadmission of its shares to trading on AIM. Terms of the Merger Prior to the Acquisitions, it is proposed that Seashell II will merge withDigital Marketing Group plc, a newly incorporated public limited company, sothat the Enlarged Group has a holding company incorporated in England and Wales.The Merger will be effected under the IBCA on the terms of the Merger plan andsubject to the Merger plan having been submitted to the Registrar ofInternational Business Companies of Belize and the issue by the Registrar of acertificate that it has been so registered. Seashell II Shareholders willreceive new Digital Marketing Group plc shares on the basis of one new DigitalMarketing Group plc share for each Seashell II Share held immediately prior tothe Merger. It is anticipated that the Merger will become effective on or around24 October 2006. The Merger Plan was approved by written resolution of the majority shareholderof Seashell II on 1 October 2006. It is intended that share certificates inrespect of the new Digital Marketing Group plc Shares will be distributed assoon after Admission as is practicable and that Seashell II Shareholders whohold depositary interests in CREST which represent their Seashell II Shares willhave their holdings of new Digital Marketing Group plc shares credited directlyinto their CREST accounts. Placing In order to increase the funds available to Digital Marketing Group plc for thegrowth of the Enlarged Group, it is proposed to place 13,728,070 new Seashell IIShares. Lord Ashcroft, through companies in which he has an interest, has agreedthat those companies will subscribe for 7,850,877 new Seashell II Shares out ofthe 13,728,070 new Seashell II Shares being placed. The balance of the SeashellII Shares will be placed with third parties (which include senior management ofDigital Marketing Group plc). Mayfair Limited, a company in which Lord Ashcrofthas an interest, has agreed to underwrite the Placing. It is intended that thePlacing will raise approximately £7.8 million (before expenses) for the EnlargedGroup. Lord Ashcroft has an interest in approximately 73.4 per cent. of Seashell II'sexisting issued share capital. Upon completion of the Placing, the Merger and the Acquisitions, DigitalMarketing Group plc is expected to have 34.2 million shares in issue which willbe owned as to approximately 18.6 per cent. by current Seashell II Shareholders(of which Lord Ashcroft is expected to be interested in up to 13.8 per cent.),approximately 20.5 per cent. by the vendors of HSM, approximately 20.0 per cent.by the vendors of Dig For Fire, approximately 5.2 per cent. by the directors ofDigital Marketing Group plc and 35.7 per cent. by Cenkos and third party placees(of which Lord Ashcroft is expected to be interested in a further 23.0 percent.). Lord Ashcroft will be interested in, in aggregate, 36.8 per cent. ofDigital Marketing Group plc on the basis that no Digital Marketing Group plcShares are subscribed by Mayfair Limited under its underwriting commitment. Digital Marketing Group plc strategy Digital Marketing Group plc will operate in both the "online" marketing and "offline" direct marketing sectors. The particular business focus of DigitalMarketing Group plc will be the integration of "online" and "offline" directmarketing, which the Digital Marketing Group plc Board calls digital directmarketing. The strategy of Digital Marketing Group plc is, through acquisition, to create afocused and specialised group of businesses offering clients digital directmarketing. The Digital Marketing Group plc Board intends that each acquisitionwill demonstrate the following characteristics: • specialisation in one of the core skills or sectors of digital direct marketing; • significant incremental growth to be gained through harnessing the collective resources of the Digital Marketing Group plc group; • significant organic growth potential; • blue chip client list with strong client loyalty; and • experienced and high quality management teams. Digital Marketing Group plc aims to provide its clients and the clients of eachof the Acquired Businesses with a range of digital direct marketing services,coupled with database marketing skills. By doing this, Digital Marketing Groupplc believes it can offer clients the ability to coordinate both their "online"and "offline" direct marketing strategy and concurrently offer the skillsnecessary to input, collect, analyse and apply customer data in order togenerate more effective digital direct marketing, higher brand-consumer loyaltyand improved client profitability. Digital Marketing Group plc's development strategy will consist of two keyelements: • "buy and build" through the acquisition of a number of businesses with complementary skills in digital direct marketing; and • "organic growth" driven by the inherent growth within the Acquired Businesses and the application of a group business development programme. Digital Marketing Group plc's acquisition strategy encompasses three elements: • completion of the Acquisitions, which have activities in "online" marketing, "offline" direct marketing and database marketing; • addition of further companies in digital marketing, digital media and emerging technologies such as mobile marketing and search optimisation; and • addition of sector-specific agencies where the opportunity for "digital direct marketing" is believed to be significant, for example, the business-to-business sector and the media and entertainment sector. Digital Marketing Group plc believes that its Acquired Businesses will be ableto offer an integrated digital direct marketing service to its customers throughbeing managed and marketed under the ownership of Digital Marketing Group plc. Summary of the Acquisitions HSM HSM is a cornerstone acquisition for Digital Marketing Group plc, providing both"online" marketing and "offline" direct marketing skills. Founded in 1991 andbased in Swindon, HSM operates via two divisions: Inbox, a full-service digitalmarketing business and HSM Telemarketing ("HSMT"), which specialises in outboundtelemarketing and database management. One of HSM's strengths is the level ofintegration that has been achieved across the two businesses enabling directmarketing through a number of digital channels. Underlying this is a proprietarytechnology platform that integrates key real-time marketing channelsencompassing email, Internet and telephone. The Digital Marketing Group plcBoard believes that this approach and powerful platform has led to HSM'snumerous awards and growing blue chip client base. HSM acts for a blue chip client base across a broad range of industry sectors.HSM has experienced a significant level of client retention, which the DigitalMarketing Group plc Board believes is due to the service offering and constantinnovation provided. HSM has experienced growth from most of its major clients. For the year ended 31 December 2005, HSM reported revenues of £4.2 million.Operating profit was £0.3 million and net profit for the year was £0.3 million. The total consideration for the acquisition of HSM is £8 million plus an elementof deferred consideration based on any surplus cash over an agreed minimum levelof net assets. The consideration will be satisfied as to £4 million in DigitalMarketing Group plc Shares and the balance in cash. Dig For Fire Dig For Fire was established in Sheffield in 1979 and has become the largestdirect marketing agency operating exclusively outside of London. Dig For Fireoffers clients end-to-end integrated direct marketing services accommodatingboth "online" and "offline" direct marketing, including web design and build,viral advertising, banner advertising, direct mail, direct response presscommunications and "online" and "offline" press relations. Dig For Fire alsooffers a strategic planning service which enables clients to understand thedirect marketing "customer journey", to identify key consumer insights and tobegin the process of customer segmentation critical to successful directmarketing campaigns. The company also offers clients "Dig Research", astand-alone research service in order to provide objective advice in the area ofdirect marketing strategy. Dig For Fire acts for a number of blue chip clients, across a broad range ofindustry sectors. For the year ended 31 March 2006, Dig For Fire reported revenues of £6.9million. Operating profit was £0.6 million and net profit for the year was £0.4million. The total consideration for Dig For Fire is £7.8 million plus an element ofdeferred consideration based on any surplus cash over an agreed minimum level ofnet assets. The consideration will be satisfied as to £3.9 million in DigitalMarketing Group plc Shares and the balance in cash. Admission, dealings and certificates Application will be made for the admission of all the Digital Marketing Groupplc Shares to trading on AIM. It is expected that Admission will take place onor around 26 October 2006. As the Merger will be effected shortly after the Placing has been completed,Seashell II Shareholders participating in the Placing will not receive sharecertificates in respect of their entitlement to new Seashell II Shares. Uponcompletion of the Merger and following Admission, Digital Marketing Group plcwill either (i) issue new share certificates of title; or (ii) in the case ofSeashell II Shareholders who hold depositary interests in CREST representingtheir Seashell II Shares, credit their CREST accounts; in either case so as torepresent the Digital Marketing Group plc Shares being issued to Seashell IIShareholders pursuant to the Merger in exchange for their holding of Seashell IIShares on the date of the Merger on a one for one basis. Digital Marketing Group plc Shares will rank pari passu in all respects with theexisting issued ordinary shares of Digital Marketing Group plc and will rank infull for all dividends or other distributions declared, made or paid on theordinary shares of Digital Marketing Group plc after the Effective Date. Definitions In this announcement, unless the context requires otherwise, defined terms shallhave the meaning given to them below: Acquired Businesses HSM and Scope Acquisitions the acquisition of HSM and Dig For Fire Admission admission of all of the Digital Marketing Group plc Shares to trading on AIM Cenkos Cenkos Securities Limited, which is regulated in the United Kingdom by the Financial Services Authority CREST the relevant system (as defined in the Uncertificated Securities Regulations 2001) for the paperless settlement of share transfers and the holding of shares in uncertificated form in respect of which CRESTCo Limited is the Operator (as defined in those Regulations) Dig For Fire the trading name of Scope Creative Marketing Limited Digital Marketing Group plc Digital Marketing Group plc, a company or the Company incorporated in England and Wales with registered number 5935923 Digital Marketing Group plc the directors of Digital Marketing Group plc and Board the proposed directors of Digital Marketing Group plc Digital Marketing Group plc ordinary shares of 50 pence each in the capital of Shares Digital Marketing Group plc issued or to be issued pursuant to the Merger and the Acquisitions directors of Digital the directors of Digital Marketing Group plc, Marketing Group plc being Stephen Davidson, Ben Langdon, Ian Robinson and Andrew Wilson Enlarged Group Digital Marketing Group plc and its subsidiaries and associated companies following completion of the Merger and the Acquisitions and, as the context may require, any subsidiaries or businesses it may acquire following Admission HSM HSM Limited, registered in England and Wales with number 03482936 IBCA the International Business Companies Act, 1990 of Belize Merger the merger of Seashell II and Digital Marketing Group plc pursuant to Part VII of the IBCA Placing the placing by Seashell II of 13,728,070 Seashell II Shares with placees proposed directors of Digital the proposed directors of Digital Marketing Group Marketing Group plc plc, being Barry Jenner, Bob Millington and Gary Stevens Scope Scope Creative Marketing Limited, registered in England and Wales with number 01677363 Seashell II Seashell II Limited, an international business company incorporated in Belize under the IBCA with registered number 37,074 Seashell II Shareholders holders of Seashell II Shares Seashell II Shares ordinary shares of 50 pence each in the capital of Seashell II Cenkos Securities Limited which is regulated in the United Kingdom by theFinancial Services Authority, is acting as nominated adviser to DigitalMarketing Group plc in relation to the AIM Admission and is not acting for anyother persons and will not be responsible to such persons for providingprotections afforded to customers of Cenkos Securities Limited or advising themon the contents of this document or any matter referred to in it. NOTES TO EDITORS Digital Direct Marketing - Market Definitions The Internet has revolutionised direct marketing as it has created an entirelynew direct-to-consumer medium. Direct marketing therefore now operates throughboth "online" and "offline" channels. "Online" direct marketing is bestdescribed as the means by which brands interact directly with consumers viachannels including the Internet, mobile telephones and interactive television. "Offline" direct marketing is the means by which brands interact directly withconsumers outside these channels. "Online" direct marketing can be carried out through: -interactive advertising (including "online" advertising, search advertising, and viral advertising; -email marketing; -websites (through website design and build programmes); and -emerging technologies (including mobile, search engine optimisation, interactive television). "Offline" direct marketing is a large and diverse industry and can be carriedout through: -direct mail; -telemarketing; -off-the-page press advertising/direct response TV; and -inserts/door drops/catalogues. Direct marketing and especially digital marketing produce large amounts ofcustomer data. The effective capture and use of this data gives rise to databasemarketing, using data to deliver highly targeted marketing campaigns to existingand prospective customers. Digital Market Trends Traditionally, marketing expenditure was dominated by mass market advertisingthrough TV, radio, press and posters. Recent industry research shows that: • advertising across all media other than "online" advertising fell by approximately £200 million year on year for the period 2004 to 2005; (1) • by comparison UK annual expenditure on direct marketing is now estimated at £16 to £17 billion and is now approaching the same size as the annual expenditure on traditional advertising (which is £19 billion according to the Advertising Association Factsheet 2005); (2) • in a survey of 300 medium and large client companies, 35 per cent. of those companies are planning to increase their direct marketing budgets in 2007; (3) • "online" advertising is experiencing significant growth. In 2005 the UK "online" advertising market grew by 66 per cent. to £1.4 billion to take the "online" sector's market share to 7.8 per cent. of the total advertising market, now exceeding spend on outdoor, radio and cinema advertising; (4) • "online" advertising is driving growth in the entire advertising market. (5) In the opinion of the Digital Marketing Group plc Board the following keyfactors will support the continued trend towards "online" marketing: • fragmentation and decline in traditional mass media; • client emphasis on ROI; • continuing technological innovation; • increased share of media consumption in favour of "online"; • broadening acceptance amongst traditional spenders in favour of "online"; • increasing broadband penetration; • emergence of the "the ipod generation"; • increasing e-commerce; • "online" data enabling brands to develop more intelligent databases; and • increasing use of the Internet by consumers for research and information. (1) Bi-annual study carried out by the Internet Advertising Bureau in partnership with PricewaterhouseCoopers ("PwC") and the World Advertising Research Centre ("WARC") (2) Direct Marketing Association Census of the Direct Marketing Industry 2005 (3) From DMA report ("Marketing and Direct Marketing Budgets Report 2006") (4) From the Internet Advertising Bureau ("IAB") (5) Confirmed by the results of the bi-annual study carried out by PwC and WARC as mentioned in (1) This information is provided by RNS The company news service from the London Stock Exchange