Jaywing PLC Placing and Acquisition (9839F)

TIDMJWNG

RNS Number : 9839F

Jaywing PLC

27 February 2018

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 GBP1.3 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 GBP1.3 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 GBP1.3 million gross (approximately GBP1.2 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 GBP95k 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 GBP1.2 million, will be used as follows:

   --      Approximately GBP0.7 million up-front consideration; and 
   --      Approximately GBP0.5 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

 
 Announcement of the Acquisition              27 February 2018 
  and Placing 
 Posting of Circular                          27 February 2018 
 Latest time and date for receipt            11:00 on 12 March 
  of Forms of Proxy                                       2018 
 General Meeting                             11:00 on 14 March 
                                                          2018 
 Admission and commencement of                    8.00 a.m. 15 
  dealings of the Placing Shares                    March 2018 
 Placing Shares credited to CREST                15 March 2018 
  stock accounts 
 Despatch of definitive share certificates     Week commencing 
  for Placing Shares                             19 March 2018 
 

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

 
 "Acquisition"             the proposed acquisition by 
                            the Company of the entire issued 
                            share capital of Frank Digital 
                            PTY LTD described in this Document 
 "Acquisition Agreement"   the share purchase agreement 
                            dated 27 February 2018 relating 
                            to the Acquisition, made between 
                            the Company and the Seller, 
                            a summary of which is set out 
                            in paragraph 4 of the letter 
                            from the Executive Chairman 
                            of the Company set out in the 
                            Circular 
 "Admission"               admission of the Placing Shares 
                            to trading on AIM 
 "AIM"                     AIM, a market operated by the 
                            London Stock Exchange 
 "AIM Rules"               the AIM rules for companies 
                            published by London Stock Exchange 
 "AUS$"                    Australian dollars 
 "Business Day"            a day (other than a Saturday 
                            or Sunday) on which commercial 
                            banks are open for general 
                            business in London, England 
 "Cenkos"                  Cenkos Securities plc (registered 
                            number 05210733) 
 "Closing Price"           the closing middle market quotation 
                            of an Existing Ordinary Share 
                            as derived from the AIM Appendix 
                            to the Daily Official List 
                            of the London Stock Exchange 
 "Company" or "Jaywing"    Jaywing plc (registered number 
                            5935923) 
 "Completion"              completion of the Acquisition, 
                            pursuant to the Acquisition 
                            Agreement 
 "CREST"                   the relevant system (as defined 
                            in the CREST Regulations) in 
                            respect of which Euroclear 
                            is the Operator (as defined 
                            in the CREST Regulations) 
 "CREST Manual"            the rules governing the operation 
                            of CREST, consisting of the 
                            CREST Reference Manual, CREST 
                            International Manual, CREST 
                            Central Counterparty Service 
                            Manual, CREST Rules, Registrars 
                            Service Standards, Settlement 
                            Discipline Rules, CREST Courier 
                            and Sorting Services Manual, 
                            Daily Timetable, CREST Application 
                            Procedures and CREST Glossary 
                            of Terms (all as defined in 
                            the CREST Glossary of Terms 
                            promulgated by Euroclear on 
                            15 July 1996 and as amended 
                            since) as published by Euroclear 
 "CREST member"            a person who has been admitted 
                            by Euroclear as a system member 
                            (as defined in the CREST Regulations) 
 "CREST Participant"       a person who is, in relation 
                            to CREST, a system-participant 
                            (as defined in the CREST Regulations) 
 "CREST Regulations"       the Uncertificated Securities 
                            Regulations 2001 (SI 2001/3755) 
                            (as amended) 
 "CREST sponsor"           a CREST Participant admitted 
                            to CREST as a CREST sponsor 
 "CREST sponsored          a CREST member admitted to 
  member"                   CREST as a sponsored member 
                            (which includes all-CREST personal 
                            members) 
 "Directors" or            the directors of the Company 
  "Board" 
 "Document"                this document which for the 
                            avoidance of doubt does not 
                            comprise a prospectus (under 
                            the Prospectus Rules) or an 
                            admission document (under the 
                            AIM Rules) 
 "Enlarged Group"          the Company and its subsidiaries 
                            following Completion 
 "Enlarged Share           the issued ordinary share capital 
  Capital"                  of Jaywing immediately following 
                            Admission 
 "Euroclear"               Euroclear UK & Ireland Limited, 
                            the operator of CREST 
 "Existing Ordinary        the Ordinary Shares in issue 
  Shares"                   at the date of this Document 
 "Form of Proxy"           the form of proxy accompanying 
                            this Document for use at the 
                            General Meeting 
 "FCA"                     the Financial Conduct Authority 
                            of the UK 
 "FSMA"                    the Financial Services and 
                            Markets Act 2000 (as amended) 
 "General Meeting"         the general meeting of the 
                            Company as described in this 
                            Document, notice of which is 
                            set out at the end of this 
                            Document 
 "Issue Price"             20 pence per Placing Share 
 "Link Asset Services"     a trading name of Link Group 
 "Listing Rules"           the Listing Rules of the UKLA 
                            made in accordance with section 
                            73A(2) of FSMA 
 "London Stock Exchange"   London Stock Exchange plc 
 "Official List"           the Official List of the UK 
                            Listing Authority 
 "Ordinary Shares"         ordinary shares of 5 pence 
                            each in the capital of the 
                            Company 
 "Overseas Holders"        Shareholders with registered 
                            addresses in, or who are citizens, 
                            residents or nationals of, 
                            jurisdictions outside the UK 
 "Participant ID"          the identification code or 
                            membership number used in CREST 
                            to identify a particular CREST 
                            member or other CREST Participant 
 "Placees"                 those persons who have conditionally 
                            agreed to subscribe for the 
                            Placing Shares under the Placing 
 "Placing"                 the proposed issue and allotment 
                            at the Issue Price of the Placing 
                            Shares to the Placees as described 
                            in this Document 
 "Placing Agreement"       the conditional agreement dated 
                            27 February 2018 and made between 
                            Cenkos and the Company in relation 
                            to the Placing, further details 
                            of which are set out in the 
                            Circular 
 "Placing Shares"          the 6,536,450 Ordinary Shares 
                            to be issued and allotted to 
                            the Placees pursuant to the 
                            Placing 
 "Prospectus Rules"        the Prospectus Rules made in 
                            accordance with EU Prospectus 
                            Directive 2003/7l/EC 
 "Resolutions"             the resolutions to be proposed 
                            at the General Meeting as set 
                            out in the notice of General 
                            Meeting at the end of this 
                            Document 
 "RIS"                     a regulatory information service 
                            as defined by the Listing Rules 
 "Seller"                  Matteo Barbelli 
 "Shareholders"            holders of Ordinary Shares 
 "Target Company"          Frank Digital PTY LTD 
 "UK" or "United           the United Kingdom of Great 
  Kingdom"                  Britain and Northern Ireland 
 "UK Listing Authority"    the UK Listing Authority, being 
  or "UKLA"                 the FCA acting as competent 
                            authority for the purposes 
                            of Part IV of FSMA 
 

Enquiries:

Jaywing plc (www.jaywingplc.com)

   Michael Sprot (Company Secretary)                                           Tel: [phone] 

Cenkos Securities plc

   Nicholas Wells/Callum Davidson (Nomad)                                  Tel: [phone] 

This information is provided by RNS

The company news service from the London Stock Exchange

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February 27, 2018 02:01 ET (07:01 GMT)