Learning Technologies Group Regulatory News (LTG)

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN LEARNING TECHNOLOGIES GROUP PLC OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF LEARNING TECHNOLOGIES GROUP PLC. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 596/2014 ("MAR").

24 April 2018

Learning Technologies Group plc

 ("LTG" or the "Company" or the "Group")

Proposed Acquisition of PeopleFluent for $150 million (£107 million)

New and complementary talent management platform and capabilities

Transformational for US presence

Immediately and significantly earnings enhancing

Learning Technologies Group plc ("LTG"), the integrated e-learning services and technologies provider, is pleased to announce that it has entered into a conditional agreement (the "Merger Agreement") to acquire the entire issued and outstanding shares of capital stock of PeopleFluent Holdings Corp. ("PeopleFluent"), the leading independent provider of cloud based integrated recruiting, talent management, and compensation management solutions, from Bedford Funding I, L.P. and Bedford HCM Holdings GP, LLC by way of a reverse subsidiary merger (the "Acquisition") for a cash consideration of $150 million (£107 million)1 (on a cash free, debt free basis), plus transaction costs. The consideration and transaction costs for the Acquisition are intended to be funded by a placing of new ordinary shares (the "Placing") raising approximately £80 million, which is conducted outside the United States, and up to c.$48 million (c.£35 million) 1 in incremental debt financing2.

The Board believes that the Acquisition has a compelling strategic and financial rationale:

· Complementary fit to LTG

o Strong strategic fit and operational benefits

o Capability, geography and verticals aligned with LTG's strategy, servicing approximately 50% of the Fortune 100

· Attractive market opportunity

o Large and growing addressable market

o Positive industry tailwinds fuelling market opportunity

o Increasing importance of talent productivity solutions

· PeopleFluent well positioned to capitalise

o Industry leader with scale

o Multiple avenues of growth with significant opportunity within existing client base

· Compelling financial profile

o PeopleFluent will be a significant addition to LTG - 2017: c.£82.8 million3 revenue (of which ~86% recurring) and c.£9.2 million3 Adjusted EBIT

o Would take LTG to c.£135 million revenue business, with Platforms expected to represent 77%4 of revenues

o LTG recurring revenue increases to c.68%4, from c.39%

o LTG Adjusted EBIT increases to c.£23.3 million3

o Strong sustained cash flow generation

· Significant cost savings and synergies identified

o Review and integration process to be completed within the first 100 days

o LTG track record of successfully integrating acquisitions, cost management and margin improvement

o Focus on increasing sales productivity, more efficient application of R&D investment and monitoring of chargeable time and utilisation to achieve comparable levels to LTG

o Revenues are expected to reduce in the near term; however, management are confident of their ability to materially improve EBIT margin

o Target EBIT margin of at least 20% for PeopleFluent in FY 2019

o Total non-recurring costs of up to $3.0 million will be incurred in order to deliver these synergies and make important investments related to the PeopleFluent Business

o Acquisition will be immediately and significantly earnings enhancing in 2018 (based on expected completion by 31 May 2018)

o Potential for cross-selling will help to underpin further opportunities for growth

1. Based on current USD / GBP exchange rate of 0.7166 as on 23 April 2018.

2. Amount raised through placing and debt financing expected to contribute to transaction fees with balance remaining with LTG as contingency cash. Total debt finance facility of $63 million subject to covenants: cash flow cover of greater than 1.1:1 from Q1 2019 and leverage not to exceed 2.75:1

3. Based on 2017 unaudited revenue of $106.6m and Adjusted EBIT of $11.9m converted to GBP at an average FY2017 USD / GBP FX Rate of 0.7766. KZO financials not included for full year impact from FY2016. Subject to restatement in accordance with the Company's own accounting principles and policies. Aggregated amounts for LTG and PeopleFluent in this presentation are included for illustrative purposes only. This should not be construed as a profit forecast and should therefore not be interpreted to mean that EBIT in any future financial period will necessarily match or be greater than those for the relevant preceding financial period.

4. Based on £21.6 million Platforms revenue from LTG (41% of total 2017 LTG Revenue). Recurring revenue represents 39% of total revenue for LTG. £82.8 million PeopleFluent revenue of which 86% is recurring revenue. This should not be construed as a profit forecast and should therefore not be interpreted to mean that revenues in any future financial period will necessarily match or be greater than those for the relevant preceding financial period.

Completion of the Acquisition is conditional upon, among other things, completion of the Placing, the incremental debt financing being available at completion of the Acquisition, all applicable waiting periods (and extensions thereof) under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or otherwise been terminated by the parties, and the Merger Agreement not being terminated, in each case, in accordance with the terms of the Merger Agreement.

Subject to the fulfilment of the above conditions, the Acquisition is expected to complete shortly after the satisfaction of the U.S. anti-trust condition which is expected to take approximately two weeks if the U.S. anti-trust authorities grant early termination of the statutory waiting period, and 30 days or more if early termination is not granted. Completion of the Acquisition is therefore expected to occur in May 2018. Details of the conditions to the Acquisition are also set out in this announcement below.

Commenting on the proposed Acquisition, Jonathan Satchell, Chief Executive of LTG, said:

"I am delighted to announce the proposed acquisition of PeopleFluent, a leading talent management platform that will be transformative for our US presence and brings us new and complementary capabilities. Learning and talent are closely aligned and integrated talent and learning solutions will become vital as the pressure increases on corporates to attract, develop and retain people.

This acquisition is fully aligned with our stated strategy from a capabilities, sector, geographic and financial profile perspective. PeopleFluent brings a large installed base of customers and significantly expands our international footprint with its US presence. We believe the financial effects of the acquisition are highly compelling."

Commenting on the proposed Acquisition, Andrew Brode, Non-Executive Chairman of LTG, said:

"I am excited by the potential of an enlarged LTG, incorporating PeopleFluent - we will now be a business with estimated £135m revenue and a strong platform for future growth. This is a transformational moment for LTG. The team from PeopleFluent are joining an exciting journey as we look to consolidate the growing yet fragmented corporate learning and talent management industry."

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this Announcement is being made on behalf of the Company by Neil Elton.

Enquiries:

Notes to Editors

About LTG:

LTG is a leader in the high growth workplace e-learning industry. The Group offers truly end-to-end learning solutions ranging from strategic consultancy, through a range of content and platform solutions to analytical insights that enable corporate and government clients to meet their performance objectives.

LTG is admitted to trading on the AIM market of the London Stock Exchange (LTG.L) and headquartered in London. The Group has offices in Europe, the United States, Asia-Pacific and South America.

About PeopleFluent:

As a leader in human resources solutions for the digital enterprise, PeopleFluent helps companies build and power a productive workforce. It serves the global market, with specific capabilities for healthcare, financial services, manufacturing, and retail. Its solutions adapt to complex talent processes, while clarifying their strategic value.

PeopleFluent's Talent Productivity Platform unifies talent acquisition and talent management into a single, collaborative experience that can attract the best candidates, can help managers make better decisions, and can empower employees to grow their careers.

PeopleFluent works with large and multinational organizations -including 50% of the Fortune 100.

IMPORTANT NOTICE

This Announcement may contain "forward-looking statements" with respect to certain of the Company's plans and its current goals and expectations relating to its future financial condition, performance, strategic initiatives, objectives and results. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "seek", "may", "could", "outlook" or other words of similar meaning. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the control of the Company, including amongst other things, United Kingdom domestic and global economic business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, the effect of competition, inflation, deflation, the timing effect and other uncertainties of future acquisitions or combinations within relevant industries, the effect of tax and other legislation and other regulations in the jurisdictions in which the Company and its respective affiliates operate, the effect of volatility in the equity, capital and credit markets on the Company's profitability and ability to access capital and credit, a decline in the Company's credit ratings; the effect of operational risks; and the loss of key personnel. As a result, the actual future financial condition, performance and results of the Company may differ materially from the plans, goals and expectations set forth in any forward-looking statements. Any forward-looking statements made in this Announcement by or on behalf of the Company speak only as of the date they are made. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to publish any updates or revisions to any forward-looking statements contained in this Announcement to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

This document and the information contained herein does not contain or constitute an offer to sell or a solicitation of an offer to subscribe or buy any securities referred to herein in the United States. Any securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act") or with any securities regulatory authority of any state or jurisdiction of the United States or under the securities laws or with any securities regulatory authority of any state or other jurisdiction of the United States and accordingly no securities referred to herein may be offered, sold, resold, pledged, delivered or transferred, directly or indirectly, in, into or within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and, in each case, in compliance with the securities laws of any relevant state or other jurisdiction of the United States. There is no intention to register any portion of the Placing in the United States or to conduct any public offering of securities in the United States.

This document and the information contained herein does not contain or constitute an offer of securities for sale, or solicitation of an offer to purchase securities, in Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction where such an offer or solicitation would be unlawful and any securities referred to herein have not been and will not be registered under the securities laws of Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction where any offer of such securities would breach any applicable law, and may not be offered, sold, resold, or delivered, directly or indirectly, within Australia, Canada, Japan or the Republic of South Africa, or in any jurisdiction where it is unlawful to do so, except pursuant to an applicable exemption.

Goldman Sachs International, which is authorised in the United Kingdom by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, is acting for the Company and no-one else as financial advisor in connection with the contemplated acquisition. Neither Goldman Sachs International nor its affiliates, partners, directors, officers, employees or agents are responsible to anyone other than the Company for providing the protections afforded to clients of Goldman Sachs International or for providing advice in connection with the contemplated acquisition or for any other matters referred to herein.

Numis, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is and is acting as nominated adviser and joint broker for the Company and no-one else in connection with the contemplated acquisition. Neither Numis nor its affiliates, partners, directors, officers, employees or agents are responsible to anyone other than the Company for providing the protections afforded to clients of Numis or for providing advice in connection with the contemplated acquisition or for any other matters referred to herein

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Goldman Sachs International or Numis or by any of their respective affiliates, partners, directors, officers, employees or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

No statement in this Announcement is intended to be a profit forecast or estimate, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

Introduction to PeopleFluent

PeopleFluent provides software solutions and services focused on talent management. PeopleFluent's talent management platform covers all aspects of the employee lifecycle, including recruitment, development, performance and compensation. PeopleFluent is headquartered in Waltham, MA and has other offices in Raleigh, NC, Irving, TX, Canada and the UK.

PeopleFluent's product offerings are primarily captured in the following product divisions:

· Talent Acquisition / Talent Management (TA / TM): TA products include modules focused on recruiting, interview and on-boarding that engage candidates and hiring managers. TM products include modules focused on managing compensation, performance, succession planning and learning activities. TA / TM contributed approximately 60% to PeopleFluent's group revenue in 2017.

· Workforce Compliance & Diversity (WCAD): Tracks compliance of hiring and compensation practices with Government regulations. WCAD helps companies establish, communicate and track metrics to achieve diversity and inclusivity goals, including offering services to create affirmative action plans, expert reports, diversity, training and monitoring services. WCAD segment contributed approximately 17% to PeopleFluent's group revenue in 2017.

· Vendor Management (VMS): Solution focused on enabling customers to manage and track the entire contingent labour workforce on one easy-to-use vendor neutral platform. VMS can track contingent labour spending including managing the customers' vendors through consolidated invoicing and also managing payments to the customers' vendors. VMS provides full visibility into cost, compliance, risk and efficiency. VMS contributed approximately 16% to PeopleFluent's group revenue in 2017.

· Workforce Planning & Analytics (WPA): Provides visualization and charting tools to assist customers in managing the workforce. WPA incorporates customizable metrics that can be easily shared between managers, teams or entire business units. WPA contributed approximately 7% to PeopleFluent's group revenue in 2017.

PeopleFluent will be a significant addition to LTG with a compelling margin enhancement opportunity:

Note: PeopleFluent financials are based on US GAAP accounting standards.

The Board believes that PeopleFluent is an attractive acquisition opportunity for the following reasons:

· Attractive market opportunity: PeopleFluent operates in a large and growing addressable market which is fuelled by a number of industry tailwinds including the increasing importance of talent productivity solutions. HR challenges are becoming increasingly complex with most HR leaders worried about the future.

· PeopleFluent is well positioned to capitalise on the market opportunity: PeopleFluent is an industry leader with scale and has multiple avenues for growth, including a significant opportunity for growth within the existing client base.

· Compelling financial profile: PeopleFluent has highly visible recurring revenue, a positive and growing EBIT and the Board believes that it is well positioned for revenue growth in the medium term.

Transaction details

The Acquisition is for $150 million (on a cash free, debt free basis), payable in cash upon completion of the Acquisition. The consideration, will be funded by proceeds of the Placing and incremental debt financing. Committed debt financing includes a $42 million term loan and $21 million revolving credit line. Uncommitted financing includes an acquisition accordion of $28 million.

The Acquisition is conditional upon, among other things:

· Completion of the Placing - being, admission of the new ordinary shares to be allotted and issued pursuant to the Placing to trading on AIM by no later than 8.00 a.m. on 27 April 2018;

· Availability of the Financing under the New Facility - being, each of the conditions to the provision and funding of the financing under the New Facility having been satisfied and complied with or waived and such financing having occurred at (or occurring simultaneously with) completion of the Acquisition;

· Anti-trust Filings - being, all applicable waiting periods (and extensions thereof) under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have expired or otherwise been terminated by the parties; and

· No Termination of the Merger Agreement - being, the Merger Agreement not being terminated in accordance with its terms.

Subject to the fulfilment of the above conditions, the Acquisition is expected to complete shortly after the satisfaction of the U.S. anti-trust condition which is expected to take approximately two weeks if the U.S. anti-trust authorities grant early termination of the statutory waiting period, and 30 days or more if early termination is not granted. Completion of the Acquisition is therefore expected to occur in May. Details of the conditions to the Acquisition are also set out in this announcement below.

Following the Acquisition, and taking account of the Group's New Facility, the enlarged group's pro forma leverage is estimated to be approximately 1.4x. Due to PeopleFluent's c. 90% cash conversion, we expect pro forma leverage to be approximately 1.0x by December 2018.

Acquisition Rationale

The Acquisition is in line with LTG's strategy to build an international leader in e-learning solutions through expanding their offering organically and through strategic partnerships and via acquisitions.

LTG's acquisition strategy places emphasis on broadening geographical reach (particularly in the United States), with a particular focus on developing presence in highly regulated sectors (e.g. pharmaceutical, energy and aviation).

The Acquisition will bring to the Group a leading talent platform with scale:

· c.$106 million of revenue

· Offers a broad and deep talent management suite

· Fully digital, interactive video and social collaboration platform

· 2,200+ total enterprise customers including c. 50% of the Fortune 100

· High recurring revenue of approximately 86%

· Compelling margin enhancing opportunity

The Board believes the Acquisition, which is expected to be immediately and significantly earnings enhancing (based on expected completion by 31 May 2018), is at an attractive valuation and provides access to a high growth market.

Update on 2020 Strategic goal

The goal, announced in October 2017, of run-rate EBIT in excess of £25m by end of 2020 achieved through organic growth and M&A financed through cash and debt remains. We will report progress on this goal excluding the impact of PeopleFluent.