Proposed Strategic Investment

RNS Number : 3023O

Zoo Digital Group PLC

28 June 2010

 



28 June 2010

ZOO Digital Group plc

("ZOO" or the "Company" or the "Group")

 Proposed Strategic Investment in the Company and Commercial Relationship Agreement

ZOO, the provider of software and software-led services for the filmed entertainment market, is pleased to announce that the Company has formed a strategic relationship by executing a subscription agreement (the "Agreement") with John Henry Holdings Inc., a subsidiary of Multi Packaging Solutions, Inc. ("MPS"), a US headquartered value-added print-based packaging solutions company.

ZOO and MPS believe that the Agreement is attractive to both companies as it should enable both parties to work closely together and help ZOO to develop new markets and applications for its proprietary software solutions for printed materials. 

Under the terms of the Agreement, MPS will make a strategic investment of £859,456 in the Company.  This comprises of the allotment and issue of 2,148,642 new ordinary shares of 15 pence each in the Company to MPS, at a subscription price of 40 pence per share (the "Subscription") which is equal to approximately 9.1 per cent. of the Company's issued share capital as enlarged by the Subscription. It also comprises of, subject to the approval of the Company's shareholders, a proposed issuance of warrants to subscribe for up to a maximum aggregate number of 2,148,642 new ordinary shares of 15 pence each in the Company at a price of 50 pence per share (together the "Investment"). The net proceeds of the Investment will be used to provide working capital for the growth of the business. 

Rationale for the Investment

ZOO has developed a market leading proposition for the production of printed materials in the entertainment industry. In developing its offering to this industry the board of directors of ZOO (the "Board") has become aware that its proprietary software could have a number of complementary applications in other sectors. MPS has relationships with a number of large companies outside of the entertainment industry that have products that require printed packaging materials that would benefit in the standardisation and streamlining of production and that need to be localised for distribution in multiple geographical markets. The Board of ZOO believes that the Agreement will allow the Company to leverage the relationships and sales capabilities that MPS has in these markets, while the Investment will give MPS an ability to benefit from any accretion in shareholder value that might arise from such activity.

Summary of the terms of the Investment:

·      the issue for cash, to MPS on 25 June 2010 of 2,148,642 new ordinary shares of 15 pence each in the capital of the Company ("Placing Shares"), on a private placement basis, at a price of 40 pence per share (representing a premium of 4 per cent. over the Company's closing share price on the AIM market of the London Stock Exchange ("AIM") on 25 June 2010) under existing authorities to issue ordinary shares granted by the shareholders of the Company at its last annual general meeting;

·      subject to the approval of the Company's shareholders at its tenth Annual General Meeting ("AGM"), to be held on 9 September 2010, the issuance of warrants to subscribe for up to a maximum aggregate number of 2,148,642 new ordinary shares of 15 pence each in the capital of the Company ("Warrants" and "Warrant Shares", as appropriate), at a price of 50 pence per share representing a premium of 30 per cent. against the closing share price on AIM at close of business on 25 June 2010. Conditions relating to the vesting of the Warrants are discussed below; and

·      MPS has agreed to certain terms that will govern the ongoing relationship between ZOO and MPS including clauses that will ensure that all future commercial transactions between the parties will be conducted on an arm's length basis and that MPS will not increase its stake in ZOO (other than the subscription of the Warrants) without the consent of the Board.

Application will be made for the Placing Shares to be admitted to trading on AIM. These Placing Shares will rank pari passu with the existing ordinary shares of the Company and dealings in the Placing Shares are expected to commence on 1 July 2010.

Commercial relationship agreement

MPS and ZOO have agreed they will enter into a commercial relationship involving, amongst other provisions, joint sales efforts for marketing ZOO products to current customers of MPS, as well as to customers new to both of MPS and ZOO in markets and sectors to which ZOO currently does not have a strong presence. New ZOO sales through this arrangement shall consist of software licence fees, software usage fees, Software-as-a-Service subscription fees and fees relating to the provision of services for pre-media, design and implementation that are generated directly as a result of the joint commercial efforts of ZOO and MPS.

The Warrants

The Warrants shall lapse after 31^st July 2013, and any ordinary shares vested under the Warrants may be exercised before or on 31^st July 2013. The Warrants shall vest according to the level of new ZOO sales achieved through the commercial relationship agreement to be entered into as described above, assessed on a rolling twelve month period.

Completion of the Investment is conditional, amongst other things, on the approval of the issuance of the Warrants by the Company's shareholders and the conditions contained in the Agreement. 

Further details of the Investment, and of the Agreement, together with why the Board believe that the proposed Investment is in the best interests of the Company and its shareholders is contained within the chairman's statement in the Company's annual accounts for the year ended 31 March 2010 that will be posted to shareholders shortly and will be available at the Company's website at www.zoodigital.com.

Information on MPS

Multi Packaging Solutions is a leading packaging company with combined revenue in excess of $500 million. MPS offers an array of packaging for the multi-media, cosmetics, pharmaceutical, horticultural, and value added consumer markets. MPS has 14 production facilities throughout the United States. Founded by Marc Shore with the financial backing of Irving Place Capital, MPS has a seasoned management, sales, and design team with vast experience in packaging. MPS offers its customers a unique depth of industry experience, breadth of technologies and range of resources. 

The Meeting

Shareholders will receive a notice convening the tenth Annual General Meeting of the Company (the "Meeting") to be held at the offices of FinnCap, 4 Coleman Street, London EC2R 5TA on 9 September 2010, and further information concerning proxies, the matters to be acted upon at the Meeting and other necessary regulatory information.

At the Meeting, in addition to the customary matters to be dealt with at an annual general meeting, ordinary and special resolutions will be proposed to approve the Investment (the "Resolutions").  The Board is recommending the resolutions relating to the issuance of the Warrants and is seeking shareholders' approval to dis-apply pre-emption rights at the Meeting to the extent required to facilitate the issuance of the Warrants.

Recommendation and irrevocable undertakings

After consideration of the Company's strategic options currently available to it in driving forward growth and shareholder value, the Directors of the Company believe the Investment is in the best interests of the Company and its shareholders as a whole as it will enable the Company to access new markets through MPS' commercial reach while benefitting from an injection of growth capital that can be utilised for this purpose. The Directors recommend that shareholders vote in favour of the Resolutions which are to be proposed at the Meeting, as they intend to do in respect of their own beneficial and connected shareholdings, which amount to 10,312,935 ordinary shares representing 44  per cent. of the issued share capital of ZOO as enlarged by the Subscription, and all of the Directors (or their connected persons) have signed irrevocable undertakings to do so.

The Company has received undertakings from MPS, who will hold 2,148,642 shares as at the date of the Meeting, to vote in favour of the Resolutions to be proposed at the Meeting.   In addition the Company has received undertakings from certain other shareholders who collectively hold 5,572,666 shares to vote in favour of the Resolutions to be proposed at the Meeting. The Company has received, in aggregate, irrevocable undertakings to vote in favour of the Resolutions in relation to 18,034,243 Ordinary Shares, representing 76 per cent. of the issued share capital as enlarged by the Subscription.

Stuart Green, CEO of ZOO commented:

"Our technology is relevant to any company that distributes in multiple territories and languages. Our offering scales very well - we can add significant extra revenues at little extra cost. This proposed partnership with MPS provides ZOO with a no-risk way to enter new markets outside of entertainment. MPS's proposed investment in ZOO at a premium to the market price shows their commitment to this partnership and we look forward to working alongside them and welcoming them as shareholders."

Marc Shore, CEO of MPS commented:

"ZOO's unique software provides a perfect extension to our full service print and packaging offering, enabling us to help our customers significantly enhance the efficiencies of global product packaging development.  We are excited to be working with ZOO in a strategic partnership that we expect will generate significant opportunities for both companies."

For further information, please contact:

ZOO Digital Group plc	0114 241 3700
Stuart Green - Chief Executive Officer
Helen Gilder - Group Finance Director
FinnCap	020 7600 1658
Marc Young/ Henrik Persson
Threadneedle Communications	020 7653 9850
Josh Royston / Graham Herring

Notes to Editors

About ZOO Digital Group plc:

ZOO Digital Group plc is a provider of creative media repurposing software and related services. ZOO's Media Collaboration Platform consists of web-based systems and an integrated suite of desktop applications that work with printed materials and audio/visual content, adapting these media to different languages, sizes, and technical formats.  ZOO makes this process extremely quick and cost effective and is clearly differentiated in the market.

ZOO's services are built on its proprietary patented software and enable customers to reduce considerably the costs and time to market of regionalized filmed entertainment titles and marketing campaigns across multiple territories and across a wide range of applications and formats, including printed materials, DVD, Blu-ray Disc, video on demand, electronic sell-through and broadcast.  Working closely with language translation partners, ZOO's media adaptation software transforms computer-based workflows through radical process re-engineering and provides clear differentiation for the company's production, consulting and custom development services. 

ZOO is focused on the worldwide creative media production markets and in particular video production for entertainment applications, with customers including major film studios and other producers and publishers of video-based consumer products.

About Multi Packaging Solutions:

Multi Packaging Solutions is a leading packaging company with combined revenue in excess of $500 million. MPS offers an array of packaging for the multi-media, cosmetics, pharmaceutical, horticultural, and value added consumer markets. MPS has 14 production facilities throughout the United States. Founded by Marc Shore with the financial backing of Irving Place Capital, MPS has a seasoned management, sales, and design team with vast experience in packaging. MPS offers its customers a unique depth of industry experience, breadth of technologies and range of resources. More information is available at www.multipkg.com.

 

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