TIDMRTHM
RNS Number : 8965Q
RhythmOne PLC
05 December 2016
RHYTHMONE PLC TO ACQUIRE PERK INC.
Exclusive Mobile and Video Supply, and Strategic Demand
Relationships
Will Fortify Core Programmatic Platform and Accelerate Financial
Performance
London, England and San Francisco, California - 5 December 2016
- RhythmOne plc ("RhythmOne" or the "Company", LSE AIM: RTHM) today
announces that it has entered into a definitive agreement (the
"Agreement") with Perk Inc. ("Perk", TSE: PER), the mobile-first
supply side rewards and engagement platform, whereby RhythmOne has
agreed to acquire all of Perk's issued and outstanding Common and
Class A Restricted voting shares and certain employee options (the
"Perk Shares") in exchange for total consideration of approximately
US$42.5M in an all stock transaction that is expected to close in
January 2017 (the "Acquisition").
The acquisition of Perk accelerates the Company's strategy to
build a unified programmatic platform with unique audiences of
uniform quality at scale. Through Perk, RhythmOne gains access to a
number of premium consumer mobile apps and web properties, adding
exclusive inventory to the Company's supply side portfolio, as well
as strategic demand relationships. For the year ended December 31,
2015, Perk generated revenues of US$49.3M and adjusted* EBITDA of
US$8.4M. The Acquisition is expected to result in an upgrade to
FY2017 revenues, and be accretive to RhythmOne in the first full
year of ownership.
About Perk
Listed on the Toronto Stock Exchange, Perk is a mobile-first
rewards and engagement platform that matches the interests of
consumers with those of brand and performance advertisers. Perk's
portfolio consists of 15 premium owned-and-operated apps, which
deliver unique targeting opportunities for advertisers at the
precise moment of consumer engagement and interaction, delivering
insights and actionable results, both on- and off-line. Through
Perk's Rewarded Engagement Platform, users are rewarded for their
app usage through points, digital goods, and coupons. This enables
brands to form deep connections with consumers to achieve greater
engagement, loyalty and conversion. Perk's insights and
intelligence solution, Perk IQ(TM), allows brands to measure
performance and uncover valuable data around advertising
attribution, brand impact, and purchase behavior.
Perk also operates a series of category-specific websites,
maintaining strategic demand and supply relationships with a number
of leading, always-on partners that include Yahoo! and Facebook.
Currently, approximately 98% of Perk's supply, which is
predominantly US-based, consists of mobile in-app or Web inventory,
while the majority of its revenue is generated from high-impact,
engaging brand or performance ads.
Acquisition Rationale
With RhythmOne's Core programmatic platform, RhythmMax now fully
established, the Acquisition will accelerate the Company's strategy
to further strengthen and scale the platform through unique
audiences on the supply side, and always-on relationships on the
demand side.
The Acquisition satisfies these objectives in a number of ways.
On the supply side, owning and operating a sizeable, highly engaged
and verifiable audience provides a powerful value proposition to
attract new and repeat demand partners to the Company's platform,
helping drive higher fill rates and cost-per-mille (CPM) pricing.
Perk's suite of premium, owned-and-operated mobile apps and
websites brings a committed, growing user base that will become
exclusive to RhythmOne. This premium owned-and-operated supply will
enable the Company to continuously build, test and scale its
quality assurance algorithms, and tap both growing performance
advertising budgets and mobile video demand - the fastest growing
segment in online advertising today.
On the demand side, Perk has long standing strategic
relationships with key always-on network demand partners, such as
Yahoo! and Facebook, among others. While Perk's access to direct
and programmatic demand is still nascent, it represents a captive
growth opportunity for the combined enterprise to provide revenue
synergies post-Acquisition. Through Perk, RhythmOne expects to add
valuable always-on demand to its unified platform, while
potentially improving yield for Perk inventory - either through
direct programmatic connections with preferred demand sources or
through guaranteed buying pools, or private marketplaces.
Importantly, the Acquisition also brings a close-knit and
tenured executive team with a long track record of success in
building, managing and profitably scaling consumer properties. This
expertise will directly complement RhythmOne's expertise in
building and managing an Ad Tech business, while also providing the
infrastructure and executive bench strength to help drive growth,
both organically and via acquisitions.
Financial Overview
For the year ended December 31, 2015, Perk generated revenues of
US$49.3M, Net loss of US$17.1M and adjusted* EBITDA of US$8.4M that
excludes certain non-cash, non-recurring and acquisition related
expenses.
Through the nine month period ended 30 September 2016, Perk
generated US$52.8M in revenues and US$3.4M in adjusted* EBITDA. As
at September 30, 2016 and December 31, 2015, Perk reported gross
assets of US$45.7M and US$49.5M, respectively. The Acquisition is
forecasted to be accretive to RhythmOne in Financial Year 2018,
being the first full year of ownership.
The Company expects to benefit from certain cost synergies
post-Acquisition, as a result of rationalizing redundant public
company costs, and marginal drawdown of combined revenues that are
considered Non-Core and non-strategic across the enterprise.
Transaction Details
Pursuant to the terms of the Agreement, the Company shall
acquire the Perk Shares for total consideration of approximately
US$42.5M inclusive of certain employee options, payable in
RhythmOne shares at a price of GBP0.381 per share, equal to
RhythmOne's volume weighted average price ("VWAP") for the 30
trading days ending on 2 December 2016. As a result of the
Acquisition, RhythmOne will issue 88,235,014 new RhythmOne shares,
raising the total number of outstanding shares to 494,004,257.
Upon completion of the Acquisition and exercise of Perk's
employee options, each Perk Share will be exchanged for 4.5116
RhythmOne shares. Using a CAD/GBP exchange rate of 1.6868, on 2
December 2016, the value of the consideration to be received by
Perk shareholders based on RhythmOne's 30-day VWAP of GBP0.381 per
share will be approximately C$2.90 per Perk Share, representing a
premium of 11.5% to Perk's closing price of C$2.60 on 2 December
2016, and a premium of 43.6% to Perk's 30-day VWAP of C$2.02.
Subject to Perk shareholder approval and the satisfaction of
other customary conditions, RhythmOne and Perk expect to complete
the Acquisition in January 2017.
The Acquisition will be carried out by way of a court-approved
"Plan of Arrangement" under Ontario, Canada laws, subject to
certain customary conditions, including the approval of not less
than 66-2/3% of the votes cast at a special meeting of Perk
securityholders that is expected to be held in mid January 2017.
Pursuant to the terms of the Agreement, the Acquisition is also
subject to the satisfaction of certain closing conditions customary
for transactions of this nature. The Agreement also provides for,
among other things, Board support and non-solicitation covenants
from Perk (subject to customary "fiduciary out" provisions that
entitle Perk to consider and accept a superior proposal and a
"right to match" in favour of RhythmOne). The Agreement also
provides for the payment of a termination fee to RhythmOne in
certain specified circumstances.
The Board of Directors of RhythmOne and Perk have each
unanimously approved the Acquisition. Perk's Board of Directors has
also recommended that its security holders vote in favour of the
Acquisition, while RhythmOne shareholders have generally
authorised, at its Annual General Meeting held earlier this year,
the Directors to issue sufficient number of shares to close the
Acquisition. Beacon Securities Limited has provided an opinion to
Perk's Board of Directors to the effect that, as of December 4,
2016 and subject to the assumptions, limitations and qualifications
set forth therein, the consideration to be received by Perk
shareholders pursuant to the Acquisition is fair, from a financial
point of view, to such Perk shareholders. Perk's directors and
senior management, and AVG Ventures, LP, representing, in the
aggregate, approximately 39% of the issued and outstanding Perk
Shares, have entered into customary voting and support agreements
pursuant to which, they have agreed to vote their Perk Shares in
favour of the Acquisition.
Copies of the Agreement and certain related documents and
agreements will be made available on RhythmOne's corporate website
and Perk's System for Electronic Document Analysis and Retrieval
(SEDAR) profile.
Cormark Securities Inc. is acting as financial advisor to
RhythmOne and DLA Piper (Canada) LLP is acting as legal counsel to
RhythmOne in connection with the Acquisition.
Commenting on the Acquisition, S. Brian Mukherjee, CEO of
RhythmOne, said:
"The acquisition of Perk builds on our transformation toward
Core mobile, video and programmatic products that drove strong
results in the first half of FY2017. RhythmMax, which is now in
full commercial production, is the principal driver of RhythmOne's
growth and provides significant operational gearing potential. Our
goal now shifts to fortifying and scaling the platform, and Perk's
products are perfectly aligned with this strategy - allowing us to
programmatically enable the Acquisition's premium inventory. Perk
adds unique mobile supply at scale, as well as key strategic demand
relationships that are complementary to ours. I would like to
welcome the talented Perk team, led by CEO Ted Hastings, which has
successfully built and run B2C properties, adding executive depth
to the Company.
Perk is expected to materially advance our financial performance
and help us to scale a leading platform to drive Industry-wide
consolidation in the second coming of Ad Tech. As the Industry
evolves, direct engagement with consumers at scale is critical.
Consistent with this we will look to grow and develop Perk's owned
and operated apps and websites to further our vision to build the
most efficient and effective platform for digital advertising and
content distribution globally."
The Company will be holding a conference call for analysts at
8.30AM GMT on Monday, 5 December 2016.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
Non-IFRS Measures
*Perk defines Adjusted EBITDA as net income (loss) from
operations before: (a) depreciation of property and equipment and
amortization of intangible assets; (b) share-based compensation;
(c) income tax expense (recovery); (d) transaction and
restructuring costs; and (e) other charges, net. Management uses
Adjusted EBITDA as a measure of Perk's operating performance
because it provides information related to Perk's ability to
provide operating cash flows for acquisitions, capital expenditures
and working capital requirements. Perk also believes that analysts
and investors use Adjusted EBITDA as a supplemental measure to
evaluate the overall operating performance of companies in its
industry. Adjusted EBITDA should be used in addition to and in
conjunction with the results presented in Perk's unaudited interim
condensed consolidated financial statements prepared in accordance
with IAS 34. Management strongly encourages investors to review
Perk's financial statements in their entirety and to not rely on
any single financial measure. As non-IFRS financial measures are
not standardized, it may not be possible to compare these financial
measures with other companies' non-IFRS financial measures having
the same or similar names.
About RhythmOne
RhythmOne is a technology-enabled digital media company that
connects online audiences with brands through premium content
across devices. Founded in 2004, the Company pioneered Internet
video search and works with digital advertisers, publishers and
content providers to offer fully integrated, cross-screen solutions
that span desktop and mobile video, rich media, display, social and
native advertising, and content formats. Through its fully
integrated programmatic platform, RhythmMax, the Company represents
digital advertising inventory across owned, controlled and extended
supply sources. The RhythmMax platform includes unique brand safety
technology, RhythmGuard, which combines leading third-party
verification and proprietary filtering technologies to ensure
inventory quality in brand safe environments. RhythmOne's goal is
to maximize the return on advertising spend and provide the most
efficient and effective marketplace for digital advertising. The
Company is headquartered in San Francisco, California with offices
in the US, UK and Canada. For more information please visit
www.rhythmone.com.
Analyst and Investor Contact
Dan Slivjanovski
RhythmOne plc
Financial Media Contacts
Edward Bridges / Charles Palmer
FTI Consulting LLP
(UK) 020 3727 1000
Nomad and Broker for RhythmOne
Nick Westlake (Nomad) / Lorna Tilbian / Mark Lander
Numis Securities Limited
(UK) 020 7260 1000
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQGUBDDBBGBGLU
(END) Dow Jones Newswires
December 05, 2016 02:46 ET (07:46 GMT)
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