Acquisition

3 Mar 2008 07:01

Formation Group PLC03 March 2008 Formation Group PLC ("Formation" or "the Group") Acquisition of James Grant Media Group Ltd ("James Grant Media Group Ltd" or "JGMG") Formation Group plc, which provides a range of professional services to high networth individuals and organisations within the sports, entertainment, music andproperty sectors has today completed the acquisition of the entire issued sharecapital of James Grant Media Group Ltd. Key Points * Acquisition of 100% of James Grant Media Group Ltd, a leading UK Talent Management Company ("the Acquisition") * Based in Chiswick, West London and established in 1984, JGMG specialises in the provision of talent management services to its clients across all sectors of the entertainment industry in the UK and US. Primarily its clients work in primetime TV and on radio and it provides contract and commercial management services * The Acquisition is in line with the Board's strategy of developing its Professional Services division by adding complementary revenue streams and services for the benefit of existing and new clients * The profit before taxation of JGMG for the year ended 30 April 2007 was £1,758,559 and the asset value of JGMG as at 30 April 2007 was £1,341,751 * The consideration for the acquisition of the total share capital of JGMG is an initial cash and share value consideration of £11.93m (of which £1.93m is a separate payment for net assets), with additional cash and share value consideration payable of £18m (linked to JGMG's financial performance over a 3 year period) to give a potential total consideration of £29.93m * The consideration payable to JGMG is being satisfied as follows: - Initial cash consideration of £7.5m (and the further payment of £1.93m for the net assets) payable on completion - Issue of 12,500,000 ordinary shares in the Group on completion (calculated as £2.5m worth of shares, issued at 20p) (the "Consideration Shares") - Additional consideration is payable based upon certain pre-determined conditions linked to JGMG's profit before tax performance in each of 3 years starting from the completion date. The total maximum additional consideration payable to JGMG against the pre-determined conditions is £18m split equally between cash and shares - The total initial cash consideration will be funded from a mixture of existing Group cash reserves and a term loan facility of £8m provided by Impala Holdings Ltd a company which is wholly owned by Balchan Management Ltd in its capacity as trustee of the David Kennedy Family Trust, the Group's largest shareholder. Formation's existing Professional Services Division Currently this division contains subsidiary companies providing Accountancy,Sports Representation, Wealth Management and Sports Corporate Finance advice toprofessional athletes, musicians, sporting institutions and other high net worthindividuals. The reasons for the Acquisition The acquisition of JGMG further complements the Group's Professional Servicesdivision and adds scale and additional depth to a growing client base across theGroup. Examples of the Group's clients within its respective Professional Servicesbusinesses are as follows; Group Business Services Provided Sector Predominance Selected ClientsJames Grant Media Talent Management Media & Entertainment Ant & DecGroup Ltd Fearne Cotton Simon Cowell Piers Morgan Phillip SchofieldKingsbridge Asset Wealth Management Sport Rio FerdinandManagement Ltd (IFA) David O'Leary Michael Vaughan Lee WestwoodO J Kilkenny & Co Ltd Accountancy & Tax Music & Sport Bryan Adams Bjork Roy Keane OasisProactive Sports Sports and Talent Sport & Media DaMarcus Beasley JoeManagement UK and USA Representation Calzaghe& Proactive Talent Brett EmertonManagement UK Coleen Mcloughlin Ryan Nelsen John O'Shea Wayne Rooney Lesley Vainikolo This acquisition underpins the Group's UK and USA position as a leadingprofessional services provider to the sports, media, entertainment and musicindustries. JGMG is looking to develop the brand management side of theirbusiness. Additional service offerings such as accountancy, tax and wealthmanagement advice will be available to JGMG's client base thereby enhancing theGroup's service proposition. Related Party Transaction As set out above, the total initial cash consideration will be funded from amixture of existing Group cash reserves and a loan facility provided by ImpalaHoldings Limited, a company which is wholly owned by Balchan Management Ltd inits capacity as trustee of the David Kennedy Family Trust, the Group's largestshareholder. The term loan facility has now been entered into between Impala Holdings Limitedand Formation, pursuant to which £8,000,000 was made available to Formation (the"Loan"), £6,000,000 of which has now been drawn down by the Company. The Loan isrepayable on 28 February 2011, or earlier if certain mandatory repayment events(as defined in the Loan agreement) occur. Interest will accrue on the Loan at arate of 3% above LIBOR and certain financial penalties apply in the event thatthe Company refinances the loan with a third party. The Directors consider, having consulted with WH Ireland Limited, its NominatedAdviser, that the terms of this loan, being a related party transaction, arefair and reasonable insofar as its shareholders are concerned. Appointment of Director The acquisition will also see Peter James Barnard Powell, JGMG's ExecutiveChairman joining the Group board with immediate effect. A further announcement will be made today setting out the disclosures requiredpursuant to Schedule 2, paragraph (g) of the AIM Rules for Companies in respectof this appointment. Pursuant to a service contract entered into between Peter and the Company,Peter, 56, will receive a basic salary of £165,000 per annum; the contract canbe terminated on 12 months notice by either party. Admission of Shares Application will be made to admit the Consideration Shares to trading on AIM. Itis expected that the Consideration Shares will be admitted to trading on Friday7 March 2008. ("Admission") The total number of shares in issue in the Group following issue of theConsideration Shares will be 220,515,112. Neil Rodford, Chief Executive of the Group commented; "I am delighted James Grant Media Group Ltd has chosen to join us and welcomeJGMG's Directors; Peter Powell, Russ Lindsay, Darren Worsley and Paul Worsleyand the rest of their team as employees of the Group. In addition to theirunquestionable collective management expertise, experience and reputation, wehave acquired a business whose clients are hugely talented and verycomplementary to our existing customer base. Their business model is alsocomplementary and provides additional visible income for the Group. I lookforward to sharing the financial performance of the enlarged Group in duecourse." Peter Powell, Executive Chairman of James Grant Media Group Ltd said; "We felt that the time was right for us to seek a like minded strategic partnerwho is as passionate about our business as we are. It remains very much businessas usual for our operational day-to-day activities and we are determined toretain our position as market leader. We are also committed to delivering evenbetter opportunities and value to our clients by developing and expanding ourbrand management business, further exploiting creative rights whilst ensuringour core talent management services remain at the heart of what we do. "In Formation, we have found an excellent strategic fit, a company with greatenergy and enthusiasm and importantly for us, one which hold the same values andclient service ethic as we do." Enquiries: • Formation Group plc; Mike Wallwork, Communications Director; 0161 980 1210 or 07795 613844 • NOMAD to Formation Group plc; W H Ireland Ltd; David Youngman or Katy Mitchell; 0161 832 2174 • James Grant Media Group Ltd; Mike Large; 020 7973 5921 or 07768 261528 Notes to Editors For further information on Formation Group plc, please visit -www.formationgroupplc.com For further information on James Grant Media Group Ltd, please visit -www.jamesgrant.co.uk This information is provided by RNS The company news service from the London Stock Exchange