Jaywing Regulatory News (JWNG)

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014 ("MAR")

27 February 2018

Jaywing plc

("Jaywing" or the "Company")

Agreement to Acquire Frank Digital Pty Ltd

Placing to raise up to £1.3 million

Jaywing plc (AIM: JWNG), a UK-based agency specialising in the application of data science, is pleased to announce that it has entered into an agreement to acquire Frank Digital Pty Ltd ("Frank Digital"), a digital marketing agency based in Sydney, Australia. Furthermore, the Company announces a conditional Placing, subject to Shareholder approval, to raise up to £1.3 million to finance the initial consideration payable in respect of the Acquisition.

Background to and reasons for the Acquisition

Jaywing's operations in Sydney have continually expanded since its acquisition of search agency Digital Massive in 2016, which now operates under the Jaywing brand. Total spend on digital advertising in Australia is expected to grow materially over the next few years, increasing by 29 per cent. from 2017 to 2021 (Source: www.eMarketer.com). Since it established itself in the region, Jaywing has experienced strong growth in Australia, alongside increasing demand from customers for a wider range of products and services. This strategic acquisition of Frank Digital serves to meet this customer demand and will further consolidate Jaywing's position in the growing Australian market, delivering additional scale and augmenting its existing services with website and digital campaign expertise.

The improved offering, with a broader set of products and services, is supported by current client opportunities and allows Jaywing greater opportunity for cross-sales. In the UK, Jaywing has seen success in cross-selling its products and services. In July 2017, Jaywing announced that it had increased the proportion of clients taking more than one service line from 1 in 4 in the previous year, to 1 in 3 of its top 50 clients.

The Directors believe that by being part of Jaywing, Frank Digital can accelerate its growth by leveraging strategic and operational support from the UK.

Commenting on the deal, Jaywing plc CEO Rob Shaw, said:

"Our acquisition of Digital Massive in 2016 has performed well, with growth in Australia outstripping that of the UK. By creating a larger agency in Australia that is consistent with our international growth strategy, we will be able to take further advantage of a growing market and consolidate our position as an agency with a reputation for excellence. Matt and his team are a great cultural fit, with an existing relationship between them and our existing operation across a number of clients."

Further information on Frank Digital

Frank Digital specialises in digital marketing, websites and mobile applications. It provides services to

a broad range of companies in various jurisdictions, including global investment manager AMP Capital, major hospitality firm Merivale, and leading multi-platform publisher Bauer Media. Frank Digital has experienced solid revenue growth, with a 46 per cent. increase from FY 2016 to FY 2017.

Frank Digital was founded in 2009 and its current director, Matt Barbelli will remain employed in the business going forward. For the 12 months ended June 2017, Frank Digital generated revenue and EBITDA of AUS$2,184k and AUS$379k respectively. As at 30 September 2017, Frank Digital had net assets of AUS$198k.

Transaction Structure and the Acquisition Agreement

Pursuant to the Acquisition Agreement, the Company has agreed to purchase 75% of the issued share capital of the Target Company for a consideration of AUS$1.2 million (subject to working capital and net debt adjustments) payable in cash on completion. 

Subject to the achievement of certain EBITDA targets, the Company will pay to the Seller two further earn out payments for the periods from 1 July 2018 to 30 June 2019 and from 1 July 2019 to 30 June 2020 subject to a maximum aggregate payment of AUS$1.2 million. 

On completion the Company will be granted an option to buy, and the Seller will be granted an option to sell, at a price of up to AUS$2.35 million the remaining 25% of the shares in the Target Company, such options being exercisable on the fourth anniversary of completion or at the time the Seller's employment is terminated. The Company has the right to settle up to 25% of the amount payable pursuant to these options by the allotment of Ordinary Shares.

The maximum consideration payable by the Company for the Target Company pursuant to all of the above is AUS$4.75 million.

The acquisition is expected to be earnings enhancing within 12 months from completion.

Details of the Placing

Jaywing proposes to raise up to £1.3 million gross (approximately £1.2 million net of expenses) through the issue of the Placing Shares at the Issue Price through Cenkos. The Placing is not underwritten.

The Issue Price of 20 pence per new Ordinary Share represents a discount of 21.6 per cent. to the Closing Price of 25.5 pence on 26 February 2018, the latest Business Day prior to announcement of the Acquisition and the Placing.

The Placing Agreement contains certain warranties and indemnities from the Company in favour of Cenkos and is conditional, inter alia, upon:

(a) Shareholder approval of the Resolutions at the General Meeting;

(b) the Placing Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms prior to Admission; and

(c) Admission becoming effective not later than 8.00 a.m. on 15 March 2018 or such later time and/or date as the Company and Cenkos Securities may agree, being not later than 29 March 2018. 

The Placing Agreement contains customary warranties and an indemnity from the Company in favour of Cenkos together with provisions which enable Cenkos to terminate the Placing Agreement in certain circumstances prior to Admission (as applicable), including where any warranties are found to be untrue, inaccurate or misleading in any material respect or in the event of a material adverse change in the financial position or prospects of the Company's group in the context of the Placing or Admission.

Application will be made for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will occur at 8:00am on 15 March 2018.

The Placing is conditional on, amongst other things, the agreement providing for the Acquisition becoming unconditional save in respect of conditions relating to the Placing, shareholder approval and admission of the Placing Shares to trading on AIM.

Following Admission, the Company will have up to 93,432,217 Ordinary Shares in issue, of which 99,622 are held in Treasury. Accordingly, the total number of voting rights of the Company's Ordinary Shares will be up to 93,332,595.

The Placing Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of Admission.

The Directors intend to subscribe for, in aggregate, approximately £95k in the Placing. A further announcement will be made in due course following their acquisition of Placing Shares.

Use of proceeds of the Placing

The net proceeds of the Placing, expected to be up to approximately £1.2 million, will be used as follows:

· Approximately £0.7 million up-front consideration; and

· Approximately £0.5 million deferred consideration

Circular and General Meeting

The Circular to Shareholders detailing the transaction is today being posted to Shareholders containing a notice of the General Meeting and the Form of Proxy. The Circular will also be available to view on the Company's website at https://investors.jaywing.com.

The Form of Proxy should be completed and returned in accordance with the instructions thereon so as to be received by Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible and in any event not later than two Business Days before the time of the General Meeting. Completion and return of the Form of Proxy will not prevent a Shareholder from attending and voting at the General Meeting should he/she/it so wish.

Recommendation

The Directors believe the Acquisition and the Placing to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend Shareholders to vote in favour of the Resolutions as they intend so to do in respect of their beneficial shareholdings amounting to 10,513,254 Existing Ordinary Shares.

Expected Timetable of Principal Events

Notes:

(i) References to times in this RNS are to London time (unless otherwise stated).

(ii) If any of the above times or dates should change, the revised times and/or dates will be notified by an announcement to an RIS.

(iii) The timing of the events in the above timetable is indicative only.

Definitions

Enquiries:

Jaywing plc (www.jaywingplc.com)

Michael Sprot (Company Secretary) Tel: 0114 281 1200

Cenkos Securities plc

Nicholas Wells/Callum Davidson (Nomad) Tel: 0207 397 8920