Sports Stars Media plc Ronaldo Project & Issue of Equity (6382U)

TIDMSPSM

RNS Number : 6382U

Sports Stars Media plc

02 January 2013

2 January 2013

Sports Stars Media plc

("SSM" or "the Group")

Ronaldo Project & Issue of Equity

SSM signs Cristiano Ronaldo to promote new football venture

SSM, the AIM-quoted sports personality media business, is pleased to announce that it has entered into an agreement with Cristiano Ronaldo, one of football's most popular and valuable players, to promote a new business concept for a worldwide, crowd-sourced football tournament for adult amateur players.

The Ronaldo project will comprise a worldwide amateur football league, endorsed and promoted by Cristiano Ronaldo and based on a new social media network. The project will focus on the notion of "fair play" and is expected to be launched in October 2013.

Highlights

   --     Pioneering a new concept of a crowd sourced football championship. 

-- A new social network platform will be the basis for the administration and interconnection of the real life football matches.

   --     Cristiano Ronaldo and his agent, Polaris, are strategic shareholders in the project. 

-- In order to fund the Ronaldo project, SSM announces that it has today raised an additional GBP711,375 at 1p per new ordinary share.

   --     The Ronaldo project has several revenue opportunities, including: 
   -      global product sponsorship 
   -      monthly subscriptions from participating players 
   -      licensing and franchising rights of the final stage playoff games. 
   -      social network portal and app advertising revenue 
   -      sponsorship of events and teams 
   -      online gamification 

-- Ronaldo is currently the most popular sports personality on Facebook, the world's most popular social network. He has over 52 million Facebook fans and 13 million Twitter followers.

CEO of Sports Stars Media, Ruben Dias, commented:

"I am delighted that Cristiano Ronaldo has endorsed our crowd-sourced football championship for amateur players. This unique, worldwide competition, which will harness the power of football and social media, will commence during 2013 and allow adults to participate in football at a grassroots level for prizes."

For further information, please contact:

Sports Stars Media plc [phone]

Ruben Dias, CEO + 351 932 436 501

www.sportsstarsmedia.com

Nominated Adviser, Cairn Financial Advisers LLP [phone]

James Caithie/Avi Robinson

Broker, Dowgate Capital Stockbrokers Limited [phone]

Neil Badger

Financial PR, Bishopsgate Communications

Nick Rome/Sam Allen/Matt Low [phone]

[e-mail]

Introduction

The Board of SSM, the AIM-quoted sports personality animation business, is pleased to announce the establishment of a new concept involving one of football's most popular and valuable players, Cristiano Ronaldo (the "Project").

The Project concept of a worldwide amateur football championship based on a new social media network was conceived shortly before SSM was admitted to AIM, but could not be implemented until, inter alia, the necessary image rights could be acquired. The Directors believe that the Project will be a valuable addition to SSM's existing animation and digital media activities. The Company has, therefore, agreed to acquire all intellectual property rights in the Project from its developers, who are also directors or shareholders of SSM. The consideration for the acquisition is to be satisfied by the issue of warrants over new ordinary shares in the Company ("Warrants") which can only be exercised if future performance-related conditions are met.

In order to fund the Project, SSM announces that it has today raised an additional EUR875,000 (GBP711,375) at 1p per new ordinary share.

Details of the Project

The Project will be incorporated in SSM, pioneering a new concept of a crowd sourced football championship.

Crowdsourcing, which can occur both online and offline, is a process that involves outsourcing tasks to a distributed group of people, in this instance amateur footballers. The difference between crowdsourcing and ordinary outsourcing is that a task or problem is outsourced to an undefined public rather than a specific body.

The Project will establish a worldwide amateur football league, which is endorsed and promoted by Cristiano Ronaldo and is based on a new social media network. Ronaldo and his agent, Polaris Sports Limited ("Polaris"), will be strategic shareholders in the Project.

It is anticipated that the Project will use Ronaldo's popularity and social reach to communicate and gain momentum. Ronaldo is currently the most popular sports personality on Facebook, the world's most popular social network, and thirteenth most popular of all Facebook fan pages. He has over 52 million Facebook fans and 13 million Twitter followers. This massive reach will be the key marketing element to announce and promote the project. A new social network platform will be developed to support the Project which will be the basis for the administration and interconnection of the real life football matches.

The Project will comprise an annual five-a-side championship where teams of 10 amateur players from anywhere in the world will compete for cash prizes. Players will be required to sign up to the social network and it is anticipated they will pay a monthly participation fee.

Based on geographic location, the network will match teams to play against each other. Teams will agree on the schedule and location of each game, play the match and submit the result. Results and videos of the games will be shared by each team in real-time on the social platform, enabling a unique social interaction.

The Project has several revenue opportunities, including:

   -      global product sponsorship 
   -      monthly subscription from participating players 
   -      licensing and franchising rights of the final stage playoff games 
   -      social network portal and app advertising revenue 
   -      sponsorship of events and teams 
   -      online gamification 

A funding requirement of EUR875,000 has been calculated to fund the following:

   -      social network web development (portal) 
   -      professional staffing for product management, sales and marketing 
   -      development of mobile applications 

- Ronaldo's minimum guaranteed royalty payment in respect of the first year from launch for the use of his image rights

Terms of theProject

The Company has entered into a promissory contract with Ronaldo and his agent, Polaris, to incorporate a new subsidiary of SSM ("Newco") to develop and operate the Project. Ronaldo and Polaris will initially hold, in aggregate, 2 per cent. of the issued shares but have options to acquire at par value an additional 13 per cent. shareholding of Newco. These options will be subject to the same performance conditions as the Warrants described below. If the Project is successful, therefore, SSM will hold an 85 per cent. interest in Newco. Polaris will be entitled to nominate one director to Newco's board. SSM will have pre-emption rights over the shares in Newco held by Ronaldo and by Polaris and "drag along" rights in the event of a future third party offer for Newco.

The Company has also entered into an agreement with Multisport & Image Management (M.I.M.) Limited for the use of Cristiano Ronaldo's image rights to promote and advertise the Project. For these rights, SSM will pay a fee of 5% of Newco's earnings before interest, tax, depreciation and amortisation to the licensor, with a guaranteed minimum fee payable one year after the project has been launched to the public. The image rights licence is for a term expiring on 31 December 2018.

The individuals named in the table below, being founders and promoters of the Project, have agreed to assign all intellectual property rights in relation to the Project to SSM in consideration of the issue of a total of 243,670,090 Warrants over new ordinary shares of 0.03p each ("Ordinary Shares") in SSM. These Warrants are exercisable at 1p per new Ordinary Share, being the subscription price at the time of SSM's admission to AIM, conditional on one or more of the following criteria being met:

- Signing up of 500,000 bona fide current users to the Ronaldo project portal; or

- Newco's revenues exceeding EUR2m in any calendar year; or

- Newco's EBITDA exceeding EUR700,000 in any calendar year; or

- Newco or its business being sold for a price in excess of EUR4m; or

- SSM's share price being above 2.5p for any consecutive period of 21 dealing days.

 
 Name              Current Holding   Current Holding   Number of Warrants 
                          (Shares)               (%)              granted 
 Ruben Dias*           140,000,000             38.87          124,959,020 
 Carlos Amaro*          24,000,000              6.66           61,855,535 
 Pedro Maria*           40,000,000             11.11           14,991,804 
 Luis Freire*                    -                 -            6,247,951 
 Pedro Belchior         12,000,000              3.33           16,557,890 
 Jose Maria da 
  Cunha                 12,000,000              3.33           14,057,890 
 Paulo Catarino 
  Ribeiro                        -                 -            5,000,000 
 Total                 228,000,000                            243,670,090 
 

*Director of the Company

In addition to one of the criteria above being satisfied, the exercise of the Warrants is conditional upon sufficient authorities to allot shares for cash being in place at the time that the Warrants are exercised.

Issue of Equity

The Project, as noted above, has an estimated funding requirement of EUR875,000. The Board of SSM is pleased to announce that it has completed a placing of 71,137,500 new Ordinary Shares at 1p per share to raise EUR875,000 (GBP711,375) from new and existing investors. It is the intention of the Board to utilise these funds in the development of the Project.

The 71,137,500 new Ordinary Shares will rank pari passu in all respects with the Ordinary Shares currently in issue. Application has been made for the 71,137,500 new Ordinary Shares to be admitted to trading on AIM and it is expected that admission will become effective and dealings will commence on 8 January 2013.

While the Board of SSM has sufficient authority to allot the 71,137,500 new Ordinary Shares for cash, it will be sending a circular to shareholders shortly to seek approval for an increase in the Directors' authority to allot Ordinary Shares for cash without applying statutory pre-emption rights to cover the exercise of Warrants described above, and to give the Board the ability to raise additional working capital by the issue of equity, if opportunities to do so arise and the Directors consider this to be in the interests of shareholders.

Related party transaction

The acquisition of the rights in relation to the Project in consideration of the grant of Warrants to certain of the Directors, as described above, is a related party transaction to which AIM Rule 13 applies. Ian Buckley, as the Director independent of the transaction, considers, having consulted with Cairn Financial Advisers LLP, SSM's nominated adviser, that the terms of the transaction are fair and reasonable insofar as the Group's shareholders are concerned.

Current trading of the existing business

Production of the first series of "Mourinho and the Special Ones" is on track and the distribution of the Gombby series continues. Recent contract gains already announced with Al Jazeera Children's Channel, the Pan-Arab edutainment television station, and BHRT, the public broadcaster of Bosnia, illustrate the increasing sales of Gombby around the world but the market for children's broadcasting generally is weaker than expected at the time of the IPO in February 2012.

As announced on 20 July 2012, the Company believes that there is a considerable opportunity in exploiting the digital versions of its IP as opposed to merely using that IP to create animations to be shown by traditional broadcasters. To realise this potential, an online version of the MSO project is already in development and the Ronaldo project will also exploit this opportunity.

Variation of the vesting terms of the directors' existing options

At the time of admission to AIM in February 2012, the Directors were granted a total of 46,800,000 options exercisable at a subscription price of 1p per new Ordinary Share under the Group's share option scheme. Half of these options vest if, prior to 1 January 2014, the consolidated accumulated EBITDA of the Group (before share option charges) derived from audited accounts exceeds EUR1.5 million and the remainder of these options vest if, prior to 1 January 2014, the consolidated accumulated EBITDA of the Group (before share option charges) derived from audited accounts reaches EUR3.5 million. Once vested, the options will be exercisable for three years, after which time they will lapse.

Given the move into digital media and the development of the business into new projects, the Directors believe that the vesting conditions of the existing options are no longer appropriate on their own and provide a materially less effective incentive to holders than they did at the date of grant. The Directors have, therefore, added an alternative vesting condition, being that the SSM share price closes above 2.5p for a period of 21 consecutive dealing days. This reflects the fact that SSM is widening its media exposure to include digital as well as broadcast and, in the Board's view, effectively aligns option holders' interests with those of shareholders.

This information is provided by RNS

The company news service from the London Stock Exchange

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