Tender Offer, Notice of GM and Trading Update

RNS Number : 6499F

XLMedia PLC

16 July 2019

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014.

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, DISTRIBUTION, PUBLICATION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM CANADA, AUSTRALIA, OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. PLEASE SEE THE IMPORTANT INFORMATION AT THE END OF THIS ANNOUNCEMENT.

FOR IMMEDIATE RELEASE

16 July 2019

XLMEDIA PLC

Tender Offer for up to 19,675,000 Ordinary Shares

Notice of extraordinary general meeting

TRADING UPDATE

XLMedia PLC ("XLMedia", the "Company" or the "Group") (AIM: XLM), a leading provider of digital performance marketing, is today posting a circular to its shareholders containing full details of a proposed tender offer at 80 pence per Share and a notice of Extraordinary General Meeting convened for 10.00 a.m. on 16 August 2019.

Unless otherwise stated, terms used in this announcement have the same meanings as given to them in the Circular.

Summary

·    The Tender Price represents a premium of approximately 10 per cent. to the mid-market price of a Share at the close of business on 15 July 2019;

·    The Tender Offer will be restricted to 19,675,000 Shares, representing approximately 9.51 per cent. of the Shares in issue (excluding any Shares held in treasury) at the close of business on 15 July 2019;

·    Shareholders (other than Restricted Shareholders) will be able to tender up to 9.51 per cent. of their holding (rounded down to the nearest whole number of Shares) under the Basic Entitlement of the Tender Offer;

·    Each Shareholder (other than Restricted Shareholders) will also be able to tender Shares in excess of their Basic Entitlement, but such excess tenders will only be satisfied on a pro rata basis to the extent that other Shareholders tender less than (or none of) their Basic Entitlement;

·    Successfully tendered Shares will be held in treasury by the Company and the number of Shares in issue carrying voting rights reduced accordingly;

·    The Tender Offer will open at 8.00 a.m. on 17 July 2019 and will close at 1.00 p.m. on 14 August 2019;

·    The implementation of the Tender Offer is conditional upon the passing of the Tender Offer Resolution at the General Meeting;

·    On the date of this announcement, the existing buyback programme shall cease; and

·    While XLMedia has continued to implement its strategy of focussing on higher margin publishing activities and growing its finance business during the first half of 2019, the business has remained stable and overall performance has been in line with the Board's expectations.

Chris Bell, Non-executive Chairman of XLMedia, commented:

"The Board is of the opinion that the full potential of the Company is not reflected in the current share price and this Tender Offer accelerates our current share buyback programme, further capitalising on our current share price."

This summary should be read in conjunction with the full text of the Circular.

The Circular is expected to be posted to Shareholders and made available on the Company's website www.xlmedia.com, later today.

Trading update

XLMedia provides an update on trading for the six months ended 30 June 2019.

During the first half of 2019, the Group's business has remained stable and overall performance has been in line with the Board's expectations. 

Pleasingly, the Company has seen a strong performance from its personal finance publishing assets in North America and Canada, which continue to gain momentum.

As anticipated, new gambling legislation in Sweden has had an impact on revenues for many gambling operators; however, the Group believes this to be a short-term issue with XLMedia's publishing assets continuing to rank well in the region.  Elsewhere, the Company continues to invest in creating new publishing assets, including in North America.

The Company has a positive material cash balance and generates strong cash flows from operations. The Company's current cash balance will support the proposed Tender Offer, ongoing organic investment initiatives and current working capital commitments. XLMedia remains a highly cash generative business and as such will continue to maintain a progressive dividend policy, distributing at least 50 per cent. of retained earnings.

The Company will publish its half year results for the six months ended 30 June 2019 in September 2019.

Information on the Company

XLMedia is a performance marketing company operating a large portfolio of informational and content rich websites globally. Its websites act as a conduit to channel users to its clients, the majority of which address two key products - gambling and personal finance. The Group also uses in-house media buying capabilities which it deploys to support its core publishing division.

The Group's publishing activities comprise of numerous informational websites and mobile sites which attract millions of users across numerous countries in their local language.  These sites attract paying users and direct them to online businesses in return for performance-based payments, which are predominantly based on revenue share and cost per acquisition.

The Company is currently focused on further building its publishing business within the established gambling sector, as well as growing its presence in the personal finance space, where the Directors believe that there exists a significant market opportunity in North America.  In order to establish its footprint, XLMedia has undertaken a number of acquisitions in this space, most notably greedyrates.ca and moneyunder30.com, and the Directors remain focused on broadening the Group's exposure to this growing sector.

In addition, the Company is closely monitoring the US gambling market, which continues to benefit from the potential introduction of legislation and regulation across various States.  XLMedia is now actively investing in building and developing a more comprehensive portfolio of publishing assets to support its entry into this market alongside investigating potential strategic acquisitions. As previously announced, in order to capitalise on this potential market opportunity, the Company has committed to spend $7 million over the next three years on targeting the US gambling market in particular.

The Company is therefore focused on the following key growth initiatives:

·    A strengthened focus on publishing activities as a core profit driver with an emphasis on gambling and personal finance;

·    Further expanding the Company's footprint in the nascent US gambling sector, which offers significant growth potential; and

·    Ongoing investment in technology whilst continuing to evaluate selective earnings accretive acquisitions.

Update on share buyback programme

On 18 December 2018, the Board announced a $10 million share buyback programme for the Company's Shares.  As part of its broader strategy to deliver shareholder value, coupled with the recent weakness in the Company's share price, the Board concluded that it was an opportune moment to undertake such an initiative, alongside maintaining its progressive dividend policy. At the Company's Annual general Meeting on 29 May 2019, authority to continue the share buyback programme was given and on 4 June 2019, the Company announced it would be commencing a further $10 million programme.

Through these programmes, to date the Company has acquired 13,548,743 Shares at an aggregate cost of approximately $10.8 million. These Shares have been acquired and held in treasury.

On the date of this announcement, the existing buyback programme shall cease and no additional purchases shall be made pursuant to it.

Background to and reasons for the Tender Offer

On 26 February 2019, the Company announced its intention to reduce activity in non-core, low margin media activities, with a view to focusing on the higher margin publishing activity, leading to an expected $30 million reduction in revenues in 2019. The reduction alongside investment in development of new publishing assets have led to an adjusted EBITDA reduction of between $6-7 million for 2019. This decision was made proactively by the Board with a view to delivering higher profit margins and better quality of earnings for Shareholders.

Despite some recent share price momentum, the Directors believe that the full potential of the Company, as highlighted in the 'Information on the Company' section above, is not reflected in the price of 72.75 pence per Share (as at close of business on 15 July 2019), and that the Shares continue to trade at a significant discount to quoted peers. 

The Company has been built on the success of its publishing assets and the Directors firmly believe in the growth potential for the business by focusing on such assets in both the gambling and personal finance verticals going forward.

In light of these considerations, the Board has concluded that, in the interests of both effective capital management and utilising the Company's strong net cash position alongside ongoing working capital expenditure and the Company's future investment plans, a tender offer offers the most efficient use of the Company's excess cash at this point in time. A tender offer is therefore being proposed to Shareholders on the Company's Register on the Record Date (being close of business on 14 August 2019).

The Board intends to continue its commitment to maintaining a dividend policy of paying out at least 50 per cent. of net profit and will continue to evaluate selective publishing acquisition opportunities, which the Board considers could accelerate earnings growth.

The Tender Offer

The key points of the Tender Offer are as follows:

·    the Tender Offer will be restricted to 19,675,000 Shares, representing approximately 9.51 per cent. of the Shares in issue (excluding any Shares held in treasury) on the Record Date;

·    each Shareholder (other than Restricted Shareholders) will be able to tender up to 9.51 per cent. of his or her holding (rounded down to the nearest whole number of Shares), with such tenders being satisfied in full ("Basic Entitlement");

·    each Shareholder will also be able to tender Shares in excess of his or her Basic Entitlement, but such excess tenders will only be satisfied on a pro rata basis to the extent that other Shareholders tender less than (or none of) their Basic Entitlement; and

·    the Tender Price will be fixed at 80 pence per Share which represents a premium of approximately 10 per cent. to the mid-market price of a Share at the close of business on 15 July 2019, the latest practicable day before the printing of the Circular.

The Tender Offer will be implemented by means of on-market purchases by Berenberg, which will, as principal, purchase the Shares tendered (subject to the overall limit of the Tender Offer) at the Tender Price and, on the completion of those purchases and in accordance with the Repurchase Agreement, sell them on to the Company at the Tender Price by way of an on-market transaction. The Shares that the Company purchases from Berenberg will be held in treasury and the number of Shares in issue carrying voting rights reduced accordingly. The Company will fund the purchase from its existing cash resources.

The Tender Offer is conditional on the Tender Offer Resolution being passed at the Extraordinary General Meeting. It is also subject to certain further conditions, which are set out in the Circular. In addition, the Tender Offer may be terminated in certain circumstances as set out in paragraph 3 of Part 3 of the Circular.

Your attention is drawn to the letter from Berenberg in Part 2 of the Circular and to Part 3 of the Circular, which constitute the terms and conditions of the Tender Offer.

Extraordinary General Meeting

The implementation of the Tender Offer is conditional upon the passing of the Tender Offer Resolution at the Extraordinary General Meeting. A notice convening the General Meeting is set out in Part 7 of the Circular.

The Tender Offer Resolution will be proposed at the General Meeting as a special resolution to seek Shareholder approval for the Company to make an on-market purchase of up to a maximum of 19,675,000 Shares from Berenberg in connection with the Tender Offer. Shareholders' tendered shares will be purchased at the Tender Price pursuant to the Tender Offer. The authority sought by way of the Tender Offer Resolution will expire on the earlier of: (1) the completion of the Tender Offer or (2) the date falling 18 months from the date of the passing of the Tender Offer Resolution.

EXPECTED TIMETABLE

Publication of the Circular	16 July 2019
Tender Offer opens	8.00 a.m. on 17 July 2019
Latest time for receipt of proxy forms and CREST proxy instructions	10.00 a.m. on 14 August 2019
Latest time and date for receipt of Tender Forms and TTE Instructions in CREST for Tender Offer	1.00 p.m. on 14 August 2019
Record Date for Tender Offer	close of business on 14 August 2019
Result of Tender Offer announced	15 August 2019
General Meeting	10.00 a.m. on 16 August 2019
Payments through CREST made in respect of Shares held in uncertificated form successfully tendered	23 August 2019
CREST accounts settled in respect of unsold tendered Shares held in uncertificated form	23 August 2019
Cheques despatched in respect of Shares held in certificated form successfully tendered	23 August 2019
Balancing certificates despatched in respect of unsold tendered Shares held in certificated form	by 29 August 2019

Notes to expected timetable:

1. Each of the times and dates referred to in the expected timetable above and elsewhere in this announcement may be extended or brought forward at the discretion of the Company. If any of the above times and/or dates change, the revised time(s) and/or date(s) will be notified to Shareholders by an announcement through a Regulatory Information Service.

2. All times referred to in this announcement are, unless otherwise stated, references to London time.

Recommendation

The Directors believe that the implementation of the Tender Offer is in the best interests of the Company and the Shareholders as a whole. Therefore, the Directors unanimously recommend that you vote in favour of the Tender Offer Resolution as they intend to do so in respect of their own interests in 6,181,222 Shares in aggregate, representing approximately 2.98 per cent. of the Shares currently in issue. Each of the Directors who holds Shares has stated that he will not tender any Shares equating to his Basic Entitlement.

The Board makes no recommendation to Shareholders as to whether or not to tender their Shares pursuant to the Tender Offer. Whether or not Shareholders decide to tender their Shares will depend on, among other things, their view of the Company's prospects and their own individual circumstances, including their tax position, on which they should seek their own independent advice.

For further enquiries, please contact:

XLMedia plc Chris Bell, Non-executive Chairman Ory Weihs, Chief Executive Officer www.xlmedia.com	via Vigo Communications
Vigo Communications Jeremy Garcia / Fiona Henson / Simon Woods www.vigocomms.com	Tel: [phone]
Cenkos Securities plc (Nomad and Joint Broker) Giles Balleny / Callum Davidson www.cenkos.com	Tel: [phone]
Berenberg (Joint Broker) Chris Bowman / Mark Whitmore / Simon Cardron  www.berenberg.com	Tel: [phone]

IMPORTANT INFORMATION

The Directors and the Company accept responsibility, both collectively and individually, for the information contained in this announcement and compliance with the AIM Rules.

Joh. Berenberg, Gossler & Co. KG, London Branch ("Berenberg"), which is authorised and regulated in Germany by the German Federal Financial Supervisory Authority (BaFin) and subject to limited regulation by the FCA, is acting solely in its capacity as joint broker to XLMedia PLC and for no one else, including any recipient of the Circular, in connection with the Tender Offer and other matters referred to in the Circular and will not be responsible to anyone other than XLMedia PLC for providing the protections afforded to clients of Berenberg or for affording advice in relation to the Tender Offer or any other matter referred to in this announcement or the Circular.

This announcement does not constitute an offer to purchase, or solicitation of an offer to sell, Shares in any jurisdiction in which, or to or from any person to or from whom, it is unlawful to make such offer or solicitation under applicable securities laws.

This announcement and the information contained herein is for background purposes only and does not purport to be full or complete. It does not constitute or form part of, and should not be construed as, any offer, invitation or recommendation to purchase, sell or subscribe for any securities in any jurisdiction and neither the issue of the information nor anything contained herein shall form the basis of or be relied upon in connection with, or act as an inducement to enter into, any investment activity.

No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. The information in this announcement is subject to change. Nothing in this announcement should be interpreted as a term or condition of the Tender Offer. Shareholders should not participate in the Tender Offer except on the basis of information in the Circular which gives further details of the Tender Offer.

Forward-looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology.  These forward-looking statements include matters that are not historical facts.  They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies and the Group's markets.  By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.  Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results.  Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's operations, results of operations, growth strategy and liquidity.  Whilst the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect.  Save as required by law or by the AIM Rules, none of the Company, its nominated adviser, Berenberg nor their respective directors, partners, officers or employees undertakes any obligation to publicly release the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.

Overseas Shareholders

The making of the Tender Offer to persons outside the United Kingdom may be prohibited or affected by the relevant laws of the overseas jurisdiction. Shareholders with registered or mailing addresses outside the United Kingdom or who are citizens or nationals of, or resident in, a jurisdiction other than the United Kingdom should read paragraph 7 of Part 3 of the Circular. It is the responsibility of all Overseas Shareholders to satisfy themselves as to the observance of any legal requirements in their jurisdiction, including, without limitation, any relevant requirements in relation to the ability of such persons to complete and return a Tender Form.

Notice for US Shareholders

The Tender Offer relates to securities of a non-US company that is incorporated in Jersey and is subject to the disclosure requirements, rules and practices applicable to companies listed in the United Kingdom, which differ from those of the United States in certain material respects.

The Circular has been prepared in accordance with UK style and practice for the purpose of complying with English law, Jersey law and the AIM Rules for Companies of the London Stock Exchange, and US Shareholders should read the entire Circular, including Part 4 (Taxation) of the Circular. The financial information relating to the Company included in the Circular has not been prepared in accordance with generally accepted accounting principles in the United States and thus may not be comparable to financial information relating to US companies. The Tender Offer is not subject to the disclosure and other procedural requirements of Regulation 14D under the United States Securities Exchange Act of 1934, as amended (the "US Exchange Act"). The Tender Offer will be made in the United States in accordance with the requirements of Regulation 14E under the US Exchange Act to the extent applicable. Certain provisions of Regulation 14E under the US Exchange Act are not applicable to the Tender Offer by virtue of Rule 14d-1(d) under the US Exchange Act. US Shareholders should note that the Shares are not listed on a US securities exchange and the Company is not subject to the periodic reporting requirements of the US Exchange Act and is not required to, and does not, file any reports with the SEC thereunder.

It may be difficult for US Shareholders to enforce certain rights and claims arising in connection with the Tender Offer under US federal securities laws since the Company is located outside the United States and most of its officers and directors reside outside the United States. It may not be possible to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws. It also may not be possible to compel a non-US company or its affiliates to subject themselves to a US court's judgment.

To the extent permitted by applicable law and in accordance with normal UK practice, the Company, Berenberg or any of their respective affiliates, may make certain purchases of, or arrangements to purchase, Shares outside the United States during the period in which the Tender Offer remains open for acceptance, including sales and purchases of Shares effected by Berenberg acting as market maker in the Shares. These purchases, or other arrangements, may occur either in the open market at prevailing prices or in private transactions at negotiated prices. In order to be excepted from the requirements of Rule 14e-5 under the US Exchange Act by virtue of Rule 14e-5(b)(12) thereunder, such purchases, or arrangements to purchase, must comply with applicable English law and regulation, including the AIM Rules for Companies of the London Stock Exchange, and the relevant provisions of the US Exchange Act. Any information about such purchases will be disclosed as required in the UK and the United States and, if required, will be reported via the Regulatory News Service of the London Stock Exchange and will be available on the London Stock Exchange website at http://www.londonstockexchange.com.

 

END

 

 

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