Zinc Media Regulatory News (ZIN)

31 Mar 2006 10:37

Ten Alps PLC31 March 2006 RNS 31 March 2006: Ten Alps plc ("Ten Alps" or "the Company") Ten Alps targets internet TV market through the acquisition of public sectormedia/contract publishing company McMillan-Scott Limited for up to £12.25m in cash on a debt-free, cash-free basis Ten Alps, the factual TV production group, announces the acquisition ofspecialist media/contract publishing company McMillan-Scott Limited ("McMillan-Scott") for up to £12.25m in cash on a debt-free, cash-free basis ("theAcquisition"), to enhance its development of public sector internet and digitalTV beyond its existing interest in the Teachers' TV project. McMillan-Scott's average turnover over the past three years was £26.14m. Themaximum acquisition price will become payable if McMillan-Scott achievesunderlying EBIT of £1.4m for the nine-month period ending December 31, 2006. McMillan-Scott and its c.250 staff publish and/or manage advertising sales inover 300 publications in the public and business to business sectors.McMillan-Scott has offices in London, Macclesfield and Manchester and has aleading position in the UK not-for-profit sector contract publishing market. Itplaced c.47,000 adverts in the last financial year and it has a number ofmulti-year contracts in place. McMillan-Scott's titles cover almost every segment of the public sector. Itsclients include government agencies, local authorities, trade associations andprofessional institutes. It is an expert publisher across many business areasincluding education, medical, transport, power, construction, commerce, leisure,defence and utilities. "The client and advertiser base of McMillan-Scott is almost a definitivedictionary of possible customers for a UK public sector web-based media andinternet TV provider, as the opportunity for niche channels evolves," said TenAlps co-founder and non-executive director Bob Geldof. "Ten Alps is now a TV publishing company as well as a TV production company - anew model to fit the era in which web TV platforms can change the ability ofproduction companies to directly access advertising customers and viewers. Thisdeal advances our plans by years and provides us with a stable, cash-generativedivision, with attractive products and very impressive staff," said Ten AlpsChief Executive Alex Connock. Former majority owner of McMillan-Scott, Martin McMillan, said: "I am pleasedthat the business we have built up over the last 35 years is joining a young andvibrant company which has admiration for our team and desire to build on oursuccess. I believe that the combined strengths of the two organisations willmake a formidable business." McMillan-Scott's Chief Executive since 2002, Adrian Dunleavy, said: "This is agreat deal for McMillan-Scott, its staff and its clients. It opens new horizonsfor our company and will be an exciting opportunity to build on the strength ofour core business." Summary terms of the Acquisition Agreement Under the terms of the Acquisition Agreement entered into by the Company and theMcMillan-Scott shareholders on 31 March 2006 ("the Acquisition Agreement"), TenAlps will initially pay £10.2 million in cash ("the Initial Consideration") forthe entire issued share capital of McMillan-Scott. Further consideration of upto £1.75m in cash (the "Earn Out") is payable subject to the achievement byMcMillan-Scott of underlying EBIT of £1.4 million for the period from 1 April2006 to 31 December 2006. £1.2 million of the Initial Consideration is to be retained pending thecalculation of an adjustment based on McMillan-Scott's net debt position as at30 June 2006. Adrian Dunleavy, 41, has signed a new service contract to remain as ChiefExecutive of McMillan-Scott. Meanwhile, McMillan-Scott's founder and formerChairman, Martin McMillan, will remain as consultant to McMillan-Scott for theduration of the earnout period. Financing The Acquisition and initial working capital will be financed through the issueof up to £13.62 million of senior debt and guarantee facilities provided by Bankof Scotland. The initial draw down will be approximately £10.52m with a furtherapproximately £3.1m of bank guarantees in respect of, inter alia, the adjustmentof the net debt position and the Earn Out referred to above. In addition, the Company has also conditionally placed up to 7,000,000 newordinary shares ("the Placing Shares") with institutional and other investors at65p per share ("the Placing Price"), raising £4.55m before expenses. ThePlacing Price represents a premium of 2.4 per cent. to the closing middle marketprice of a Ten Alps Ordinary Share on 30 March 2006 and application will be madefor the Placing Shares to be admitted to trading on AIM and such admission isexpected to become effective on 6 April 2006. The net proceeds of the Placingwill be applied towards reducing the bank debt taken on to finance theAcquisition. "Ten Alps has not fully utilised its existing cash balances in this deal, inorder to retain flexibility for future acquisitions and internal investments,working capital for TV programming and some security against unforeseeneventualities," said Nitil Patel, Ten Alps' Finance Director. "Anyone readingthe TV trade press would know that there are substantial opportunities on thehorizon, some of which we are looking at, and it makes sense not to constrainourselves." McMillan-Scott background McMillan-Scott produces titles for many government departments and localauthorities in England and Wales. It is a leading UK publisher for thenot-for-profit sector contract publishing market, and sits within a contractpublishing industry which in 2004 was measured by Mintel / APA at £344m(predicted to rise to £531m by 2009, representing a higher growth rate than forUK advertising as a whole). Ten Alps' belief is that a proportion of this not-for-profit sector contractpublishing business will gravitate online and onto the video internet over thenext five years. Following the Acquisition and given Ten Alps' experience inthis sector through the Teachers TV project, the Ten Alps' Directors expect theCompany to be well placed to secure a meaningful share of this potentiallysignificant market. McMillan-Scott's clients include Diabetes UK, Nursing and Midwifery Council, theUKTI/DTI, British Waterways, The British Veterinary Association, The CaravanClub, the British Chambers of Commerce, the Association of AccountingTechnicians, Local Authority Building Control, the CBI, the Driving StandardsAgency, the Road Haulage Association and the Royal Aeronautical Society. Mostof the work is print-based, though there are also evolving web design and eventsprovision operations within McMillan-Scott. Over the past three years the average turnover of McMillan-Scott was £26.14m(with very little variation between the years) and the underlying average EBITwas c. £1m. Business is generated principally from advertising sales related toniche titles and directories, as well as design and other publishing services.Out of the 300+ publications handled by McMillan-Scott, around 25 titles areowned by McMillan-Scott, whilst the majority are titles published for clients. Ten Alps has taken a long term lease on McMillan-Scott's head office inMacclesfield. This office houses McMillan-Scott's central functions, which maybe additionally used by other Ten Alps companies over time. Adrian Dunleavy, Chief Executive, joined McMillan-Scott in 2002. He waspreviously Chief Executive of Nationwide Accident Repair Services PLC andNational Tyre Service Limited, and has held senior management positions withContinental AG and Shell. He has signed a new service contract which hasprofit-related performance elements related to McMillan-Scott achievingunderlying profits in excess of the earnout targets referred to above. Ten Alps' Integration Strategy To crystallise the changes, Ten Alps intends to reorganise into two divisions.TV & Radio Production, which will include the six broadcast production companiesmaking programmes for mainstream channels and TV Publishing & Internet, whichwill comprise operations which tailor publishing to specific interest groups oradvertisers and will include McMillan-Scott, Ten Alps Internet & Digital TV, TenAlps Live and the group's marketing operations. Ten Alps Internet & Digital TV will be based in the London offices ofMcMillan-Scott, in Savoy St. and will be headed by Nigel Dacre, former ChiefExecutive of Teachers' TV, which has pioneered public sector TV and now hasaround 800+ TV programmes online. The unit will explore opportunities forinternet and digital TV amongst McMillan-Scott's 300+ strong client base,working alongside its offices and call centres in Macclesfield and Manchester aswell as in London. Ten Alps has been advised in this Acquisition by Collins Stewart acting asfinancial adviser and joint broker in the placing. Canaccord Adams Limited, TenAlps' nominated adviser, acted as joint broker. Grant of Share Options Ten Alps intends to grant the following options during the day: the grant toAlex Connock (CEO and director of Ten Alps) of options over 100,000 ordinaryshares of 2 pence each, the grant to Nitil Patel (Finance Director) of optionsover 100,000 ordinary shares of 2 pence each and the grant to Bob Geldof(Non-Executive Director) of options over 100,000 ordinary shares of 2 penceeach. The options granted to Alex Connock and Nitil Patel shall be granted underthe provisions of the Company's Enterprise Management Incentive Share OptionPlan and the options granted to Bob Geldof shall be unapproved options. Theexercise price for all options granted will be equal to the closing price of TenAlps' shares at the end of today and all options can be exercised between theday following the date of grant and the tenth anniversary of the date of grant. For further information Peter BinnsBinns & Co0207 786 9600 Ten Alps plcAlex Connock (CEO)0207 428 3100 Nitil Patel (Finance Director)07990 578356 www.tenalps.com This information is provided by RNS The company news service from the London Stock Exchange