Acquisition of Shoptalk and Groceryshop

RNS Number : 3871X

Hyve Group PLC

18 December 2019

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, HONG KONG, NEW ZEALAND, SINGAPORE, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 ("MAR").

For immediate release

18 December 2019

Hyve Group plc

("Hyve" or the "Group")

Acquisition of Shoptalk and Groceryshop

Hyve, the next-generation global events business, has acquired Shoptalk Commerce LLC ("Shoptalk") and Groceryshop LLC ("Groceryshop"), two US-based market-leading events focused on e-commerce broadly as well as the food and grocery segments specifically, for a total consideration of $145m (c. £110.8m¹), on a cash free, debt free basis (the "Acquisition").

Hyve also today announces a fully underwritten non pre-emptive placing (the "Placing") of up to 59,584,541 new Ordinary Shares in the Company (the "Placing Shares") alongside a subscription of 14,577,259 new ordinary shares by the founders and certain other management shareholders of Shoptalk and Groceryshop ("Subscription Shares"). Together, the total number of Placing Shares and Subscription Shares will not exceed 74,161,800, representing approximately 10% of the Company's existing issued share capital.

Strategic highlights

·      Product-led acquisition of two market-leading US events consistent with the Group's strategy

·      Capitalising on the high growth end markets of e-commerce and online grocery, offering near and medium-term growth opportunities

·      Market leading products with strong customer satisfaction, with NPS of +50 (Shoptalk) and +42 (Groceryshop), and key customers including Amazon, Google, eBay, Facebook FedEx, IBM and Microsoft

·      Access to a best of breed model in hosted buyer strategy, supported by bespoke software and content creation to improve Hyve's key buyer acquisition capabilities

·      Continued evolution of the portfolio towards market-leading events and global brands

·      Established and led by the founders and former management team of Money20/20, Anil D. Aggarwal and Simran Rekhi Aggarwal (the "Founders"). The Founders will remain with Shoptalk and Groceryshop for a minimum of 12 months in order to oversee integration

Financial highlights

·      2019E revenue of $35.8m and adjusted EBITDA of $12.2m²

·      Track record of high growth, with revenue CAGR of 90% between 2016 (launch of Shoptalk) and 2019E and strong visibility of revenues for FY20, with bookings for both Shoptalk and Groceryshop ahead of FY19²

·      Expected to be materially earnings enhancing in FY21³ (the first full financial year following completion)

·      ROIC⁴ expected to be in excess of the Group's WACC within three years

·      Global Brands revenue as a proportion of Group revenue for FY19, when including Shoptalk and Groceryshop, would have increased from 23% to approximately 31%

Transaction structure

·      Consideration of $145m (c. £110.8¹m), on a cash free, debt free basis equating to 11.9x 2019 adjusted EBITDA²

·      Signing and completion on 18 December 2019

·      Leverage (defined as net debt/trailing pro-forma EBITDA) expected to be below 2x by the FY20 year end, in-keeping with the group's targeted level

·      Funded through:

o  drawdown under refinanced debt facilities (£250m facility providing additional liquidity and flexibility); and

o  placing of the Placing Shares to certain existing shareholders and new institutional investors, fully underwritten by Numis Securities Limited ("Numis")

·      The founders together with Zia Daniell Wigder and Caroline Farley, two other management team shareholders of Shoptalk and Groceryshop, will use $15m of their proceeds from the Acquisition to subscribe for the Subscription Shares

·      Placing Shares and Subscription Shares will comprise an issue of up to 74,161,800 new ordinary shares representing up to 10% of existing share capital under existing shareholder authorities

·      Admission of Placing Shares and Subscription Shares expected 23 December 2019

Mark Shashoua, CEO of Hyve, commented:

"I am very pleased to announce the acquisition of two truly market-leading events, Shoptalk and Groceryshop. This acquisition continues our evolution into a best in class portfolio of market-leading events. We see multiple areas of growth from these events, including future geo-clone opportunities and leveraging their best of breed hosted buyer strategy, using their bespoke software on selected Hyve events.

Anil and Simran have a strong track record of building world class events and I look forward to working with them again as we integrate these incredible events into our portfolio.

This acquisition delivers on our vision to create the world's leading portfolio of content-driven, must-attend events that provide an outstanding experience and return on investment for our customers."

Anil D. Aggarwal, Founder of Shoptalk and Groceryshop, commented:

"Shoptalk and Groceryshop are widely regarded as the best conferences in the retail, grocery and consumer packaged goods industries, and have established influential new standards for the events industry in areas ranging from groundbreaking original content to unprecedented networking programs. Hyve is the only new home we considered for these events because it shares a common culture and approach to investing and developing products that consistently exceed customer expectations. Hyve's global portfolio of market-leading events will provide the best platform for growth for our events in the long term."

For further information please contact:

Hyve Group plc Mark Shashoua, CEO / Andrew Beach, CFO / Melissa McVeigh, Group Director of Communications	[phone]
Numis (Sole Broker and Sole Bookrunner) Nick Westlake / Matt Lewis / Hugo Rubinstein / Will Baunton	[phone]
FTI Consulting Charles Palmer / Emma Hall / Chris Birt	[phone]

Numis which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting solely for the Company and for no one else in connection with matters set out in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to matters set out in this announcement. Numis are acting as placing and settlement agent in connection with the Placing.

This announcement contains forward-looking statements relating to the business, financial performance and results of Hyve's and the industry in which Hyve operates. These statements may be identified by words such as "expect", "believe", "estimate", "plan", "target", or "forecast" and similar expressions, or by their context. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements and neither Hyve nor any other person accepts any responsibility for the accuracy of the opinions expressed in this presentation or the underlying assumptions. No obligation is assumed to update any forward-looking statements.

This announcement does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities in the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, pledged or otherwise transferred directly or indirectly  in or into the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offering of the Placing Shares or the Subscription Shares in the United States.

This announcement is not, and under no circumstances is it to be construed as, a prospectus, an offering memorandum, an advertisement. or an offer to sell or a solicitation of an offer to buy any of the securities referred to herein in Canada. The Placing Shares and/or the Subscription Shares will not be qualified for sale to the public under applicable Canadian securities laws and, accordingly, any offer and sale of the Placing Shares or the Subscription Shares in a province or territory of Canada may be made only on a basis that is exempt from the prospectus requirement of such securities laws.

Additional information

Shoptalk and Groceryshop Overview

Shoptalk has become the leading US e-commerce event and fast growing Groceryshop is already the leading grocery e-commerce event. The events were established and are led by Anil D. Aggarwal and Simran Rekhi Aggarwal, who also founded and led Money20/20, and both are held in Las Vegas. Shoptalk and Groceryshop focus on developing innovative, content-led events supported by bespoke technology and workflows developed to support its hosted meetings offering.

Shoptalk was launched in May 2016 and focuses on the growing e-commerce segment that is disrupting the $4 trillion US retail industry5 and which has created a need for content-rich, change-focussed events. There is a proven scope for geo-clones following the successful staging of Shoptalk Europe in 2017. Groceryshop was launched in the US in 2018 and is aimed at the $1 trillion US food and grocery segment⁶.  Shoptalk and Groceryshop are market-leading shows that are considered "must attend" in their markets with a customer centric approach delivering high customer satisfaction.

The high-quality content programmes in both events feature industry-leading keynote speakers and four to six tracks of content providing choice for attendees, bringing together the community of e-commerce change-makers to discuss the future of the industry.

Shoptalk and Groceryshop have grown to their current scale based on three revenue streams:

Attendee revenue: c. 11,500 people attended Shoptalk 2019 and Groceryshop 2019, of which 45% are paying attendees and 64% were Director-level or above (mostly split across retailers, brands and tech companies). Attendees are attracted by the strength of the content programme and networking opportunities.

Hosted Meetings: Shoptalk and Groceryshop have developed an industry-leading hosted meeting offering, underpinned by highly automated technology. In 2019, more than 660 companies executed c. 11,000 meetings with c. 2,000 individuals from c. 775 hosted retailers and brands. Management consider hosted meetings to be an area for development at the wider Hyve group providing the potential for further revenue opportunities across the group. The hosted meetings proposition is underpinned by bespoke technology workflows developed for Shoptalk and Groceryshop and Hyve has entered into a source code license and transition and platform services agreement under which Hyve is granted a worldwide, fully-paid, non-exclusive, royalty free, perpetual and irrevocable license to the software for use at any Hyve events.

Sponsorship / exhibiting: the main objectives for sponsors and exhibitors are to network, generate sales and leads and showcase products. Shoptalk and Groceryshop take a consultative approach to selling in order to best meet customer's objectives. Approximately 880 companies sponsor/exhibit at Shoptalk and Groceryshop each year. Many also pay for hosted meetings and buy additional tickets for their teams to attend.

The Directors believe there are near and medium term growth opportunities, most notably: (1) expected strong growth trajectory of the existing events; (2) the relaunch of Shoptalk Europe and/or other geo-clone opportunities and (3) the roll out of hosted meeting technology at other selective Hyve events.

Shoptalk generated revenues of $5.2m in the year ended 31 December 2016, $15.6m in the year ended 31 December 2017 and $21.7m in the year ended 31 December 2018, and is estimated to generate revenues of $27.5m in the year ended 31 December 2019. Groceryshop generated revenues of $4.6m in the year ended 31 December 2018, and is estimated to generate revenues of $8.3m in the year ended 31 December 2019. Shoptalk and Groceryshop's gross assets were approximately $61m at 31 December 2018 (unaudited).

Transaction structure

Amended and restated debt facilities

The Company has refinanced its current senior secured term and revolving credit facilities with its existing bank syndicate plus one new bank, to increase aggregate commitments to a total of £250m, extend the tenor and improve certain other terms, including: 

·     £100m term loan facility;

·     £150m revolving credit facility;

·     Extended tenor to 2023 with a one year extension option;

·     Reduced financial covenant package; and

·     £50m incremental facilities option.

Placing and subscription

·      The Company has also today, by separate announcement, announced the details of the fully underwritten placing to part fund the Acquisition.

·      The Company is financing the acquisition from the bank facilities, its existing cash resources and a pre-fund of part of the Placing proceeds. In the highly unlikely event that Admission does not take place, the Company would be required to repay the pre-funded amount.

·      The Subscription Shares will be subscribed at the 10-day average trading price of the Company's ordinary shares in the period to 5 November 2019 (being the date that the Company and Shoptalk and Groceryshop entered into binding heads of terms in connection with the Acquisition). 

·      Further details of the Placing and the terms and conditions of the Placing are set out in the separate announcement.

Directors' participation in the Placing

The following Directors of the Company intend to participate in the Placing and subscribe for the following Placing Shares:

Director	Number of Placing Shares	Value of Placing Shares at the Placing Price (£)
Mark Shashoua		500,000
Richard Last	100,000
Andrew Beach	25,000

The advisers to Hyve Group plc on this transaction were legal advisors: DLA, debt advisory: Macfarlanes and PWC, and transaction services: PWC.

1 Exchange rate of £1 : $1.31, as at 18 December 2019

2 Estimated for year to 31 December 2019, although both events have been held and therefore revenue is an actual figure; unaudited based on diligenced management account information. EBITDA has been prepared by the Company on the basis of  Shoptalk and Groceryshop management account information and has been subject to due diligence. EBITDA has been calculated to reflect a corporate rather than partnership structure. Revenue visibility is provided by Shoptalk and Groceryshop management.

3 Analysis has assumed an exchange rate of £1 : $1.33, as at 13 December 2019

4 ROIC defined as net operating profit after tax divided by total deal costs (being consideration paid, integration costs, fees, placing commissions and refinancing fees)

5 Source: Globaldata, estimated figures for 2019

 

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