Proposed disposal of Perfect Information

19 May 2014

 

Centaur Media plc

 

 

Centaur Media plc (LSE: CAU, "Centaur," the "Group"), the business information, events and media group, has conditionally agreed to sell Perfect Information Limited ("Perfect Information"), a leading provider of corporate finance and capital markets documents, to Mergermarket Limited ("Mergermarket") for an enterprise value of £26m (the "Proposed Disposal").

 

In addition, Centaur has conditionally agreed to the early settlement of the earn-out entitlement of the former shareholders of E-consultancy.com Limited ("Econsultancy") for £12.5m in cash (the "Proposed Settlement").

 

Highlights

o    Conditional sale of Perfect Information to Mergermarket for an enterprise value of £26m subject to certain adjustments based on the completion balance sheet

·       Single format business which does not fit Centaur's market strategy and has a limited overlap with core customers, content and technology

·       Simplifies Centaur's business and supports focus on core areas

·       Realises significant funding for investment in growth

o    Conditional early settlement of Econsultancy earn-out for £12.5m in cash

·       Key business within Centaur's marketing portfolio

·       Subscription and events-led information provider to global digital marketing and e-commerce community

·       Econsultancy acquired in July 2012 for initial cash consideration of £12m with deferred performance based consideration of up to £38m due in 2016

·       Agreement assumes Econsultancy will generate EBITDA of not less than £3.5m in 2015

·       Full integration of Econsultancy into marketing portfolio will immediately start to accelerate growth

Centaur has also announced today its interim management statement for the period from 1 January 2014, based on results for the four month period to 30 April 2014 and with further commentary on trading up to 16 May 2014

 

Both the Proposed Disposal and the Proposed Settlement are subject to shareholder approval.

 

Andria Vidler, CEO of Centaur, said:

 

"Our strategy is to focus on our core markets and leverage the strengths of our businesses to provide audiences and customers with the benefits of expertise and synergies around content, insight, and digital technology.

 

"Perfect Information is an excellent data business but it does not fit with the rest of the business and has only a limited opportunity to grow under Centaur's ownership.

 

"The funds raised will strengthen our balance sheet and provide additional capacity for investment in other portfolios across the Group.

 

"The immediate investment into the Econsultancy settlement enables us to fully integrate our marketing portfolio, the largest part of the group, and by working together more effectively, we are able to further accelerate growth across this portfolio."   

 

Enquiries

 

Centaur Media plc	+44 (0) 20 7970 4000
Andria Vidler, Chief Executive Officer
Mark Kerswell, Group Finance Director
Trillium Partners Limited (Financial adviser to Centaur)		+44 (0) 20 3008 8375
Stephen Routledge / Philip Mastriforte / Andrew Zelouf
Numis Securities Limited (Sponsor and broker to Centaur)		+44 (0) 20 7260 1000
Lorna Tilbian / Chris Wilkinson / Nick Westlake
Instinctif Partners (PR adviser to Centaur)		+44 (0) 20 7457 2020
Adrian Duffield / Kay Larsen

 

Note to editors

 

Centaur is a leading UK-based business information, events and media group. It strives to be the first place professionals and consumers turn for information, insight and interaction.

 

Its portfolio of leading market brands includes: Marketing Week, Econsultancy, The Profile Group, Creative Review, Design Week, Money Marketing, The Platforum, Tax Briefs, The Lawyer, VBR, Employee Benefits, The Engineer, Homebuilding & Renovating, Period Living and Real Homes, The Business Travel Show, The Meetings Show and SubCon. 

 

Trillium Partners Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Centaur Media Plc and no one else in connection with the matters referred to in this announcement and apart from the responsibilities and liabilities, if any, which may be imposed on Trillium Partners Limited by the Financial Services and Markets Act 2000 and the regulatory regime established thereunder, Trillium Partners Limited will not be responsible to anyone other than Centaur Media Plc for providing the protections afforded to clients of Trillium Partners Limited or for providing advice in relation to the matters referred to in this announcement.

 

Numis Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Centaur Media Plc and no one else in connection with the matters referred to in this announcement and apart from the responsibilities and liabilities, if any, which may be imposed on Numis Securities Limited by the Financial Services and Markets Act 2000 and the regulatory regime established thereunder, Numis Securities Limited will not be responsible to anyone other than Centaur Media Plc for providing the protections afforded to clients of Numis Securities Limited or for providing advice in relation to the matters referred to in this announcement.

 

Disposal of Perfect Information and proposed settlement of earn-out entitlement of Econsultancy

 

The Proposed Disposal is of sufficient size relative to the size of the Company to constitute a Class 1 transaction under the Listing Rules and is, therefore, conditional upon the approval of Shareholders.

One of the Econsultancy Vendors, Ashley Friedlein, is a director of Econsultancy and therefore a related party for the purposes of the Listing Rules.  The Proposed Settlement is also conditional upon the approval of Shareholders.

A circular will be distributed as soon as practicable ahead of a general meeting convened to seek the approval of Shareholders for the Proposed Disposal and the Proposed Settlement. Further information is included below.

1.   Introduction

 

The Board of Centaur Media Plc ("Centaur" or "the Company") announces today that Centaur Communications Limited ("CCL"), a wholly-owned subsidiary of Centaur, has entered into a conditional binding agreement to sell Perfect Information Limited for an enterprise value of £26 million, comprising a cash consideration of £25.3 million that is subject to certain adjustments based on the completion balance sheet, payable at Completion.

 

The Board of Centaur also announces today that it has entered into a conditional binding agreement with the former shareholders of E-consultancy.com Limited, a company acquired by Centaur in July 2012, to settle the earn-out entitlement under the Econsultancy SPA for a cash payment of £12.5 million.

 

The Proposed Disposal is of sufficient size relative to the size of the Company to constitute a Class 1 transaction under the Listing Rules and is, therefore, conditional upon the approval of Shareholders.

 

One of the Econsultancy Vendors, Ashley Friedlein, is a director of Econsultancy and therefore a related party for the purposes of the Listing Rules. The Proposed Settlement is also conditional upon the approval of Shareholders.

 

2.   Information on Perfect Information

 

Perfect Information is a leading provider of corporate finance and capital markets documents to a subscriber base including virtually all of the major global investment banks, corporate law firms, financial services consultancies and accountancy firms. The business offers a suite of digital workflow products which enable subscribers to make better, quicker corporate finance decisions.

 

Perfect Information tracks approximately 50,000 publicly quoted companies across North and South America, Europe and Asia Pacific and has a 23-year database of over 18 million documents, which is supplemented at a rate of around 3,000 documents per day. The depth of the database, together with its proprietary classification technology, has established Perfect Information as an essential product within the professional communities that it serves. Perfect Information employs 30 people and is based in London. The management team led by Greg Simidian is remaining with the business.

 

In the year ended 30 June 2013, Perfect Information generated revenue of £6.1 million, and operating profit of £1.4 million. The total assets of Perfect Information as at 31 December 2013 were £6.4 million.

 

Further financial information on Perfect Information will be set out in the circular.

 

3.   Background to and reasons for the Proposed Disposal

 

Following the appointment of Andria Vidler as CEO in November 2013, the Centaur Group has set out a clear strategy that places audiences at the heart of the business, focuses on its core markets with portfolio strategies that unite the strengths of the businesses and offers its audiences the benefits of expertise and synergies around content, insight and digital technology.

 

The core market portfolios are Marketing, Financial, Home Interest, and the Professional division. The Professional division comprises four subsidiary market facing portfolios: Legal, HR, Engineering and New Markets. The latter encompasses all the current single format businesses, including Perfect Information.

 

Perfect Information has been a successful part of the Company and has been consistently profitable. Most of Perfect Information's customers, however, are global investment banks and there is limited overlap of customers, content and technology between Perfect Information and the majority of the Company's other brands. While Perfect Information provides highly effective workflow solutions, it is a single format business where beyond the distribution of data, the Company has limited opportunity to add value or insight to Perfect Information's customer base. Further, to grow Perfect Information rapidly requires significant international investment and therefore, while the Company can currently only offer limited additional value, there is a material value opportunity to a buyer with an established international infrastructure.

 

Following completion of the Proposed Disposal the Company intends to apply the proceeds of the Proposed Disposal to settle the payment due under the Settlement Agreement. The disposal proceeds will also increase the Company's balance sheet capacity and enable the Board to invest further in its core markets, acquire assets with a better strategic fit for the Company and accelerate growth across the business. Further details will be set out in the circular.

 

The Board also believes that the Proposed Disposal represents an excellent opportunity for Shareholders to realise a compelling return on the Company's original investment in Perfect Information.

 

4.   Principal terms and conditions of the Proposed Disposal

 

The principal agreement covering the Proposed Disposal is the Share Sale Agreement. Under the terms of the Share Sale Agreement, Centaur's wholly owned subsidiary CCL and Greg Simidian, a director and shareholder in Perfect Information, have conditionally agreed to sell the entire issued share capital in Perfect Information to the Purchaser. CCL holds 98.18 per cent. of the issued share capital of Perfect Information with the balance being held by Greg Simidian.

 

The consideration for the Proposed Disposal will be £25.3 million payable in cash at Completion. This comprises the enterprise value of £26 million less an estimated net debt and net working capital adjustment of £0.7 million. The consideration is subject to a potential adjustment based on the actual net working capital and actual net debt amounts of Perfect Information as at 31 May 2014. If the net working capital of Perfect Information at 31 May 2014 is less than £0.3 million or if the net debt is greater than £0.8 million, the consideration will be reduced by the shortfall. If the net working capital of Perfect Information at 31 May 2014 is greater than £0.3 million or if the net debt is less than £0.8 million, the consideration will be increased by the amount of the surplus.

 

The Share Sale Agreement contains warranties and a tax indemnity customary for a transaction of this nature. CCL's maximum aggregate liability for any claims either for breach of the warranties or under the tax indemnity is capped at the aggregate amount of the consideration it receives.

 

Completion is conditional upon approval by Shareholders of the Disposal Resolution at the General Meeting. Completion of the Proposed Disposal is not conditional upon Completion of the Proposed Settlement.

 

A summary of the principal terms and conditions of the Share Sale Agreement will be set out in the circular.

 

5.   Information on the Continuing Group and future strategy

 

The Continuing Group will continue to be a leading business information, events and media group. It is organised into two operational divisions, Centaur Insight and Centaur Live. Its portfolio of leading market brands include Marketing Week, Econsultancy, The Profile Group, Creative Review, Design Week, Money Marketing, The Platforum, Taxbriefs, The Lawyer, VBR, Employee Benefits, The Engineer, Homebuilding & Renovating, Period Living, Real Homes, Business Travel Show, The Meetings Show and Subcon.

 

The Company will maximise the value of its core brands by focusing on market-led portfolios rather than individual siloed businesses. This will place the Company in a stronger position to revitalise its core brands, build further audience engagement and enable more innovative marketing solutions. The Company will continue to re-balance the focus of the Continuing Group towards events and paid-for digital content, both through investment in organic growth and through strategic acquisitions.

 

In the year ended 30 June 2013, the Centaur Group generated revenue of £72.0 million, and adjusted operating profit of £9.8 million. As at 31 December 2013 the total assets of the Centaur Group were £150.6 million, gross debt was £31.3 million and net debt was £26.9 million.

 

6.   Information on the Purchaser

 

The Purchaser is a leading provider of financial information. It provides news and data on mergers and acquisitions and also the fixed income market. It delivers intelligence, data and analysis electronically to over 4,000 firms operating within a range of financial sectors, including investment banking, private equity, hedge funds, legal and corporate finance.

 

The Purchaser has a subscription-based revenue model and in the year ended 31 December 2013, it generated revenues of over £100 million. The company was founded in 2000 and currently has over 800 people in 65 locations around the world, including North America, Asia and Europe.

 

The Purchaser is ultimately owned and controlled by funds advised by BC Partners Limited, a pan-European private equity firm which currently advises funds totalling over €12 billion.

 

7.   Use of proceeds and financial effects of the Proposed Disposal and the Proposed Settlement

 

At Completion, the net cash proceeds due to CCL and GS arising from the Proposed Disposal are expected to be approximately £24.5 million, after taking account of estimated transaction costs of approximately £0.8 million. £0.5 million of the net cash proceeds is payable to Greg Simidian.

 

Prior to any reinvestment of the proceeds arising from the Proposed Disposal, the Proposed Disposal is expected to be dilutive to underlying earnings for the year to 31 December 2014 and subsequent years. Nevertheless, the Board believes that the disposal of Perfect Information at the price that has been conditionally agreed will create value for Shareholders.

 

The proceeds arising from the Proposed Disposal will be used to settle the payment due under the Settlement Agreement (if the Settlement Resolution is passed by Shareholders at the General Meeting) and, subject to the passing of the Disposal Resolution, will be used to reduce the Continuing Group's net debt by repaying outstanding drawings on the Company's senior facility under which £31.3 million had been drawn at 31 December 2013. The committed facilities under this senior debt facility will be reduced to £25 million following the Proposed Disposal and the Proposed Settlement.

 

Over the coming months, from a strengthened financial position, the Board will consider utilising the available headroom on the debt facility to finance a range of options to invest in its core business. This investment may include making appropriate strategic acquisitions aimed at leveraging key strengths across the portfolio, and investment across its finance and CRM platforms. The board is not currently actively considering any particular strategic acquisitions.

 

The Company intends to maintain a progressive dividend policy. However, reflecting what is expected to be a continuing seasonal re-balancing of the business, the Company expects to re-balance its interim and final dividend payments on an equal basis, rather than what has historically been a weighting to the dividend payment for the period January to June.

 

However, in the event of the Proposed Disposal being approved by shareholders, the second interim dividend, to be declared at the time of the results for the six months to 30 June 2014, will reflect the current established weighting, that is, a weighting to the dividend payment for the period January to June, in line with current market expectations.

 

In any event the interim and final dividends for the year to 31 December 2015 will be equally weighted, as set out above.

 

8.   The Proposed Settlement

 

By a share purchase agreement dated 22 June 2012 made between Ashley Friedlein, Philip Redding, Matthew O'Riordan, Ewen Sturgeon, Peter Abraham, Linus Gregoriadis, Chris Lake, Craig Hanna, Charlie Salter and Tom Stuart (the "Econsultancy Vendors") (1), CCL (2) and the Company (3), CCL agreed to purchase the entire issued share capital of Econsultancy (the "Econsultancy SPA"). The acquisition of Econsultancy was completed on 11 July 2012. The consideration payable under the Econsultancy SPA was (a) an initial payment of £12 million paid on Completion, subject to an adjustment of £235,000 in favour of the Company by reference to the net working capital of Econsultancy at Completion and (b) an earn out payment, calculated as a multiple of 7.5 times Econsultancy's EBITDA for the financial year ending 31 December 2015 less the amount of the initial payment and subject to a cap of £38 million (the "Earn Out"). The Earn Out is due to be paid to the Econsultancy Vendors in March 2016. Early settlement of the Earn Out has been agreed between CCL and the Econsultancy Vendors, subject to Shareholder approval.

 

Under the terms of the Proposed Settlement, CCL has agreed to pay the Econsultancy Vendors £12.5 million in full and final settlement of all or any right to receive the Earn Out.

 

The Econsultancy SPA contains restrictions on the Company and CCL that relate to the organisation and operation of the Econsultancy business during the period until 31 December 2015, including restrictions on hiring and firing of Econsultancy employees, moving offices, changing IT systems, software or web applications, integrating Econsultancy's business with that of the rest of the Centaur Group or cross selling other Centaur Group products and services to Econsultancy's customers or subscribers. The Proposed Settlement will bring certainty about the amount payable to the Econsultancy Vendors and will also end these restrictions. The Directors believe that the Proposed Settlement will enable the Company to accelerate growth across the portfolio of Centaur's marketing businesses and to accelerate the delivery of cost savings and the development of a common technical platform across the Centaur Group's digital subscription offerings.

 

The Proposed Settlement is classified as a "related party transaction" under the Listing Rules as one of its parties, Ashley Friedlein, is a director of Econsultancy, which is a subsidiary undertaking of the Company. The Proposed Settlement is conditional upon the approval of Shareholders. The Proposed Settlement is also conditional upon Completion of the Proposed Disposal.

 

Following completion of the Proposed Settlement, Econsultancy's founder and chief executive Ashley Friedlein has agreed to remain with the Group at least until 31 December 2015 as President of Centaur's portfolio of marketing businesses. Centaur's portfolio of marketing businesses includes Econsultancy, The Profile Group, Marketing Week, Creative Review and Design Week. In this new non-operational role, Mr Friedlein will help develop new opportunities, particularly internationally, which leverage all of the brands, content and relationships of the combined operation.

 

9.   Background to and reasons for the Proposed Settlement

 

At the time of the acquisition of Econsultancy, Econsultancy's EBITDA expectations for the earn-out year to 31 December 2015 were in the region of £4 million, which would have resulted in an earn-out payment of £18 million. Econsultancy's trading performance in the financial year to 30 June 2013 was disappointing and as a result, the Centaur Group announced on 11 July 2013 that it had reduced its EBITDA expectations in respect of the earn-out year to 31 December 2015 from £4 million to £3 million, with a consequential reduction in the anticipated deferred consideration to £10.5 million. Actions taken in the summer of 2013 to rationalise Econsultancy's overseas operations alongside good recent growth across their subscription revenue base mean that Econsultancy is now trading in line with original expectations and the Company anticipates that EBITDA in the year to 31 December 2015 will significantly exceed £3 million. In the event EBITDA in the year to 31 December 2015 is £3.5 million, the earn-out liability would be £14.25 million. The Proposed Settlement amount of £12.5 million reflects what the Board believes is an appropriate discount to reflect both the timing and certainty of the Proposed Settlement amount.

 

As described in paragraph 3, the Centaur Group is focusing on its core markets with a portfolio strategy that unites the strengths of its businesses and offers its audiences the benefit of expertise and synergies around content, insight and digital technology. Marketing is one of the Centaur Group's core market portfolios, and the Board believes that settling the Econsultancy earn-out liability now will enable the Group to operate Centaur's marketing assets, including Econsultancy, The Profile Group, Marketing Week, Creative Review and Design Week, as one coherent business, and in turn accelerate growth across this portfolio. The Board also acknowledges that:

 

(a) in the event the Econsultancy earn-out liability is not resolved now, the Group will not be able to achieve cost synergies estimated at approximately £0.5 million per annum until 2016 and further will not be able to scale a single digital platform across the Centaur Group; and

 

(b) in the event that Econsultancy continues to trade ahead of expectations, the earn-out liability payable in 2016, which is capped at £38 million, could be materially higher than is currently anticipated.