RNS Number:4720Z
Medal Entertainment & Media PLC
02 August 2002
Strictly embargoed until: 07.00, 2 August 2002
Proposed Acquisitions and Placing
Medal Entertainment and Media plc ("MEM" or "the Company") today announces that
it has conditionally agreed to acquire the entire issued share capitals of
Leisureview Limited ("Leisureview") and Fountain Television Limited ("Fountain")
for an aggregate maximum amount of #8 million. Both businesses are being
acquired on a debt free basis.
* Leisureview is a video publishing business founded in 1986. The company,
which is based in Middlesex and Cheshire, specialises in military history,
aviation and TV continuity marketing and employs 26 people. The acquisition
of Leisureview will be for a maximum amount of #1 million.
* Fountain, a wholly owned subsidiary of Avesco plc, operates one of the
UK's largest fully equipped independent television studio facilities and
provides services to the major broadcasters and independent producers.
Fountain operates from a studio complex in Wembley, West London, where it
has a total maximum studio space of 13,200 sq. ft. Fountain offers a wide
range of support facilities to its clients including a restaurant, dressing
rooms, conference rooms and production offices. The company employs 45
people. The acquisition of Fountain will be for a maximum amount of
#7 million.
* MEM proposes to raise a total of #10.25m, which comprises: a Placing for
cash to raise #3.4m at a placing price of 70p per share and bank facilities
of #6.85m. In addition, the Company will issue #1.5m of Consideration
Shares to a subsidiary of Avesco.
* The bank facilities of #6.85m have been arranged with Barclays Bank plc,
conditional upon Completion, of which #4.65m will be drawn down on
Completion and will be applied in funding part of the cost of the
Acquisitions and to provide additional working capital for the further
development of the Enlarged Group.
* Proposed change of the Company's name to Mercury Media & Entertainment
plc.
* Proposed appointment to the Board of Directors of Michael Mercieca as
Chief Financial Officer and Company Secretary.
* Durlacher Limited appointed as Nominated Adviser and joint broker and
Teather & Greenwood Limited appointed as joint broker.
Steve Ayres, CEO of MEM plc, commented: "Leisureview is a well-established video
publisher with around 2,000 titles in its library, which include, amongst
others, 'The Great War' produced by the BBC. Leisureview offers a platform for
the growth of the group's DVD publishing business both direct to the public and
via trade customers. Fountain is the UK's largest independent TV studio, with
customers such as BBC, LWT, Hat Trick and Tiger Aspect. The acquisition of
Fountain will offer a route for the group to secure relationships with
production companies."
"We believe that these acquisitions are complementary in nature and that they
represent a dynamic base from which to build MEM into a significant audio visual
publishing business."
For further information, please contact:
Steve Ayres, Chief Executive John West / Rosie Brown
MEM plc Tavistock Communications Limited
Tel: 020 7434 4596 Tel: 020 7600 2288
Introduction
The Board of Medal Entertainment & Media is pleased to announce that the Company
has conditionally agreed to acquire the entire issued share capitals of
Leisureview and Fountain for an aggregate maximum amount of #8 million.
The Leisureview Acquisition involves the payment of #850,000 to the Leisureview
Vendor in cash on Completion and an additional payment of up to #150,000
(satisfied as to 50 per cent. in cash and 50 per cent. by the allotment to the
Leisureview Vendor of the Further Consideration Shares) dependent upon the
amount of Leisureview's outstanding creditors at Completion. The Leisureview
Acquisition will be made through a new subsidiary of MEM, Medal Distribution
Limited.
The Fountain Acquisition involves the payment of #1,673,000 to the Fountain
Vendor (satisfied as to #1.5 million by the issue of 2,142,857 Initial
Consideration Shares and 2,142,857 Consideration Warrants and as to
approximately #173,000 in cash) and the discharge of approximately #5,327,000 of
the existing debt of Fountain. The consideration will be adjusted by the amount
by which the current assets at Completion exceed or are less than (as the case
may be) the current liabilities of Fountain, subject to a maximum adjustment of
#250,000 provided that Completion takes place before 31 August 2002. The
Fountain Acquisition will be made through a new subsidiary of MEM, Medal
Productions Limited.
In order to provide the necessary finance for the Acquisitions, the Company is
raising #10.3 million through the Placing and new debt facilities. Accordingly,
the Company has also announced today that it proposes to raise #3.4 million
(gross of total expenses, #2.7m net of total expenses) through the issue of
4,857,857 Placing Shares at the Placing Price of 70p (representing 53.1 per
cent. of the Enlarged Share Capital). As agents for the Company, Durlacher and
Teather & Greenwood have, pursuant to the Placing Agreement, placed all of the
Placing Shares with institutional and other investors. In addition, under the
terms of the Placing Agreement, each of the Placees will receive one Placing
Warrant for each Placing Share subscribed. The Company has also arranged debt
facilities of #6.85 million with Barclays Bank plc, conditional upon Completion,
of which #4.65 million will be drawn down on Completion and will be applied in
funding part of the cost of the Acquisitions and to provide additional working
capital for the further development of the Enlarged Group.
In view of the aggregate size, the Acquisitions constitute a Reverse Takeover
(in accordance with the AIM Rules) and are conditional, inter alia, on the
approval of Shareholders, which is to be sought at the Extraordinary General
Meeting. At the Extraordinary General Meeting, the Company will also seek
approval of the Shareholders to change the Company's name to Mercury Media &
Entertainment plc. An explanatory admission document and circular, which will
contain the notice of Extraordinary General Meeting, is being sent to
Shareholders and Warrantholders today.
In addition, the acquisition of Fountain is also conditional upon the approval
of the shareholders of Fountain's ultimate parent company, Avesco, in general
meeting. Accordingly, Avesco will convene an extraordinary general meeting of
its shareholders in due course.
The issue of the Placing Warrants and the Consideration Warrants constitutes an
Adjustment Event (as defined in the Warrant Instrument) so far as the
Warrantholders are concerned. The Directors do not believe that it is
appropriate for the rights conferred by the Existing Warrants to be subject to
an Adjustment Event at this time. Accordingly, approval of the Warrantholders to
waive any rights to an Adjustment Event at this time is to be sought at the
Warrantholders' Meeting.
The Company, having previously redeemed the 50,000 Redeemable Shares in the
capital of the Company, will seek Shareholder approval for the cancellation and
removal of those shares from the authorised share capital of the Company.
It is expected that dealings in the new Ordinary Shares and Warrants will
commence on AIM on 30 August 2002.
Background to and reasons for the Acquisitions
In the Company's AIM admission document dated 30 October 2001, the Board stated
its intention to build a company that actively participates in each of the
writing, production, exploitation and ownership of copyright in the media rights
and publishing sector.
The Board believes that the activities of the Target Companies fit within the
above criteria. The Board believes that both Fountain and Leisureview have
experienced management teams and sound reputations within their respective areas
of activity. In particular, the Board believes that Leisureview offers a
platform for the growth of video publishing and distribution for the Enlarged
Group through the publishing and distribution of videos and DVDs both direct to
the public and to trade customers. Fountain has good relationships with
television production companies and therefore, the Board believes, offers
additional opportunities to the Enlarged Group. The Board considers that the
activities carried on by the Target Companies represent a suitable base from
which to build the Medal Entertainment & Media business principally in the media
rights and publishing sector.
The Company intends to assist Leisureview and Fountain to:
* obtain finance to grow their activities and, in the case of Leisureview,
to acquire programming rights and
* maximise any benefits and synergies arising from the combination of the
expertise of the members of the Board and the members of the management of
the Target Companies specifically in the area of intellectual property
creation and exploitation.
Board Appointment
On Completion, Michael Mercieca will be appointed to the Board as Chief
Financial Officer. He will also become Company Secretary and Roger Edmunds will
resign as Company Secretary.
Mr Mercieca has 15 years' experience in finance and strategic roles in
television. From 1987 to 1994, he was with the BBC where he was involved with
the planning and funding of BBC cable and satellite ventures both in the UK and
overseas. He left the BBC in 1994 to join BSkyB where he was part of the
founding digital television team with specific responsibility for interactive TV
until 1996. Since 1996, Mr Mercieca has run his own interim financial and
strategic consultancy. He was also group finance director of Mentorn Barraclough
Carey Limited, a TV production and distribution company, and was chief financial
officer and main board member of pan-European B2C internet retailer,
Letsbuyit.com NV, which is listed on the Neuer Markt.
Michael Mercieca has entered into a service agreement with the Company dated 1
August 2002 conditional upon Completion, but no previous employment counts
towards his period of continuous employment. His service agreement can be
terminated by either party on 12 months' notice.
Information on Leisureview
Leisureview is a video publishing business founded in 1986. The company, which
is based in Middlesex and Cheshire, specialises in military history, aviation
and TV continuity marketing and employs 26 people. For the year ended 31
December 2001 Leisureview made a pre-tax loss of #125,000 on total sales of
#4,473,000. Net assets at 31 December 2001 were #609,000.
Information on Fountain
Fountain operates one of the UK's largest fully equipped independent television
studio facilities and provides services to the major broadcasters and
independent producers. Fountain operates from a studio complex in Wembley, West
London, where it has a total maximum studio space of 13,200 sq. ft. Fountain
also offers a wide range of support facilities to its clients including a
restaurant, dressing rooms, conference rooms and production offices and it
employs 45 people. For the year ended 31 March 2002 Fountain made a pre-tax
profit of #155,000 on total sales of #4,704,000. Net liabilities (as a result of
Avesco intra-group debt) at 31 March 2002 were #580,000.
Richard Murray, a non-executive Director of the Company, is also the deputy
chairman and founder of Avesco, the ultimate parent company of Fountain.
Accordingly, Mr Murray has not been involved in any of the deliberations of the
Board in relation to the acquisition of Fountain and has refrained from giving
an opinion on the acquisition of Fountain.
Management of the Enlarged Group
The Board intends to put in place a group executive committee to manage
operational issues consisting of the chief executive and chief financial officer
of the Company and certain members of the senior management of Leisureview and
Fountain. The group executive committee will meet on a regular basis and will
have the benefit of calling upon the expertise of the non-executive Directors as
appropriate.
The group operating committee will be responsible for monitoring the day-to-day
operations of Fountain and Leisureview as well as appointing key operational
management.
Following Completion, the Board intends to continue with the process of
identifying and acquiring additional businesses which will be complementary to
the Enlarged Group and which will provide a more extensive portfolio of
intellectual property rights in the areas of TV and video production, home video
and DVD programme formats and underlying publishing rights.
Warrants
The Company has in issue 2,207,804 Existing Warrants to subscribe for a total of
4,415,608 Ordinary Shares at 77 pence per share. As part of the terms of the
Placing and the Fountain Acquisition, the Company will issue a further 7,000,714
Placing Warrants and Consideration Warrants. The Existing Warrants, Placing
Warrants and Consideration Warrants will rank pari passu in all respects and
will be exercisable in accordance with their terms following Completion.
Following Completion, the Company will have in issue a total of 9,208,518
Warrants.
Share Option Plan
The Directors believe that it will be important for the executive members of the
Board, senior management and employees of the Enlarged Group to be incentivised
with a suitable share option plan. They believe that equity incentives provide a
valuable method of attracting, retaining and rewarding the best managers and
personnel.
Accordingly, the Board has introduced the Share Option Plan and, immediately
following the announcement of the proposals detailed in this document, granted
an option over 300,000 Ordinary Shares under the unapproved part of that plan at
the Placing Price to Stephen Ayres. The Company has also entered into a
stand-alone option agreement (as he is not yet an employee of the Group) with
Michael Mercieca granting him an option over 235,714 Ordinary Shares at the
Placing Price, conditional on him becoming an employee of the Company. The terms
of Mr Mercieca's option over 235,714 Ordinary Shares at the Placing Price is
otherwise on the same terms as that granted to Steve Ayres under the unapproved
part of the Plan. Neither of these options are conditional on the achievement of
a specified performance condition. These options will not be included in the
limits on share capital available to the Share Option Plan.
Change of name
A resolution will be proposed at the EGM to change the Company's name to Mercury
Media & Entertainment plc. The existing certificates in relation to Ordinary
Shares and Warrants will remain valid.
Dividend Policy
The Company's dividend policy will be under review in light of the progress of
Fountain and Leisureview and the availability of distributable reserves. The
Company is prohibited under the terms of the Facility Agreement from paying any
dividends prior to any final dividend in respect of the financial year ending 31
March 2004. In addition, the Company may need to retain funds to finance the
requirements of the Enlarged Group and any future acquisitions.
Current Trading and Prospects
The Company has not traded since incorporation and there has been no significant
change in its financial position since 31 March 2002.
On Completion, the Enlarged Group will be trading on an ongoing basis. The Board
believes that the Target Companies are complementary in nature and that they and
their senior management represent a dynamic base from which to build the Medal
Entertainment & Media business principally in the home video and DVD publishing
and TV and video production and sectors.
Annual General Meeting
The notice convening the first Annual General Meeting of the Company to be held
at the offices of Nabarro Nathanson, Lacon House, 84 Theobald's Road, London
WC1X 8RW at 9.30 a.m. on 27 August 2002 is being sent to Shareholders today. In
addition to the ordinary business relating to the adoption of the accounts,
re-election of directors and auditors, an ordinary resolution will be proposed
to authorise the Directors to allot shares and special resolutions will be
proposed to disapply the statutory pre-emption rights and to authorise the
Company to purchase its own shares.
Extraordinary General Meeting and Warrantholders' Meeting
A circular and notice to Shareholders and Warrantholders convening the
Extraordinary General Meeting and the Warrantholders' meeting respectively to be
held at the offices of Nabarro Nathanson, Lacon House, 84 Theobald's Road,
London WC1X 8RW at 9.40 a.m. and 9.50 a.m. respectively on 27 August 2002 (or
such later time as the Annual General Meeting of the Company convened for the
same date shall have concluded or been adjourned), is being sent to Shareholders
and Warrantholders today.
Copies of the admission document and circular will be available from the offices
of Nabarro Nathanson, Lacon House, 84 Theobald's Road, London WC1X 8RW and from
the offices of Durlacher Limited, 4 Chiswell Street, London EC1Y 4UP.
Terms used in this announcement have the same meaning as those defined in the
circular and admission document being posted to Shareholders today.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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