Placing of 51,319,648 new Ordinary Shares at 3.41p per share
Company name change to Deal Group Media plc
IBNet plc (“the Company”), the search engine marketing and internet intelligence company, has conditionally agreed to acquire the entire issued share capital of The Deal Group Limited (“dealgroupmedia") by way of a reverse takeover. The acquisition will be satisfied by the issue of 205,221,335 consideration shares, which, at a Placing Price of 3.41p, represents £7 million. It is proposed that the Company changes it name to Deal Group Media plc following an EGM to be held on 17 October 2003.
dealgroupmedia is a provider of performance based on-line advertising which focuses on maximising the return on clients’ advertising spend. Since its launch in early 1999, dealgroupmedia has worked with some of Europe’s biggest on-line media planning and buying agencies, on-line brands, websites and portals. In the year to 31 May 2003, its turnover was £7.4 million on which it made a pre-tax profit of £583,000.
In order to provide additional working capital for the further development of the enlarged group, IBNet also proposes to raise approximately £1.2 million, net of expenses, by issuing 51,319,648 Placing Shares at 3.41p per share.
The acquisition constitutes a reverse takeover pursuant to the AIM Rules and is therefore subject to shareholder approval which will be sought at the EGM. Application has been made to the London Stock Exchange for admission to trading on AIM of the Existing Ordinary Shares and the New Ordinary Shares. Admission is conditional, inter alia, on the passing of certain Resolutions at the EGM.
Adrian Moss, currently founder and CEO of dealgroupmedia and who will become CEO of the enlarged group on completion, said:
“This transaction will enhance dealgroupmedia’s established position as a leader in performance based online marketing that focuses on delivering more return on investment (ROI) for advertisers’ marketing budgets. The enlarged group will offer a comprehensive range of Internet marketing products and services to its combined client base and will be the first UK supplier of ROI based online marketing solutions that also offers search marketing and Internet intelligence services.
“Both our companies already share similar client bases with some customer overlap and many have indicated that they would be in favour of a one-stop-shop online marketing offering. Combining the companies will provide a number of opportunities to add more value for our clients in addition to commercial synergies. The industry is likely to undergo further consolidation and the new Board will continue to look for opportunities.”
Toby Smallpeice, CEO of IBNet, said:
“The reverse takeover is fully supported by the Board and we believe that it is in the best interests of shareholders. Our companies have complementary product ranges and combining them will give real advantages over competitors. dealgroupmedia is highly regarded within the industry, the management has a proven track record, and it is already profitable, having grown quickly since it was founded in 1999. The funds raised as part of this reverse takeover will be used to enable the development of new products and services, and help drive the enlarged group forward.”
Further details concerning the background to and reasons for the acquisition, details on the two companies, the proposed board of directors and the Placing, Admission to AIM and capital reorganisation are set out below.
For further information, please contact:
The Deal Group Limited
Adrian Moss, Chief Executive Officer + 44 (0) 20 7691 1880
Toby Smallpeice, Chief Executive Officer + 44 (0) 20 8987 6700
KBC Peel Hunt Ltd
Capel Irwin + 44 (0) 20 7418 8900
Bankside Consultants Limited Tel: +44 (0) 20 7444 4140
Ariane Vacher / Julian Bosdet
The following information has been extracted without material adjustment from the circular to be sent to IBNet plc’s shareholders dated today, 24 September 2003:
Background to and reasons for the Acquisition
Since the Company was admitted to AIM in March 2000, the Board has evaluated a number of acquisition proposals. After careful consideration and due diligence the Board believes that the Acquisition is in the best interests of Shareholders.
The Directors and the Proposed Directors believe that the Acquisition will enhance the current IBNet client offerings by providing complementary online advertising services. The Enlarged Group will offer a comprehensive range of Internet marketing services.
The Board believes that the executive management team of The Deal Group Limited (“The Deal Group”) has a proven track record that will enable them to add value to, and grow, the business of the Enlarged Group. The Board also believes that the Proposed Directors have a complementary range of skills which will further benefit the Enlarged Group.
INFORMATION ON IBNET
IBNet's range of services provides companies with intelligence on how their intellectual property and branding are represented on the Internet. The Company monitors for instances of piracy, intellectual property abuse, financial deception, brand defamation, share ramping and libel of its clients' presence on the web, representing some well known brands including Nestle, Boots and GSK. IBNet has two main search engine marketing divisions, Webgravity, which focuses on the UK corporate marketplace and Webwurld, which targets small to medium sized companies across Europe.
In January 2002, IBNet acquired Webgravity Limited, a UK based search engine marketing consultancy. Webgravity specialises in bespoke search marketing solutions that are designed to increase online visibility and drive new business to its customers' websites. Webgravity represents a number of well known brands.
Webwurld.com is a European search engine marketing portal which offers self service search marketing products to small and medium sized enterprises. Webwurld has partnered with some of the world's largest search engines to offer an inclusion service into their search results. Webwurld is available in English, German, French, Spanish and Italian.
The financial information relating to IBNet set out below has been extracted from the comparative table
Year to30 June 2001£'000 9 months to31 March 2002£'000 Year to31 March 2003£'000
Turnover 402 1,188 1,881
Gross profit 354 988 1,301
Other administrative (3,008) (2,125) (1,673)
Depreciation – (149) (226)
Operating loss before (24,630) (1,488) (1,536)
Operating loss after (2,654) (1,286) (598)
Net cash/(debt) 2,041 (870) (620)
1. The loss for the year ended 30 June 2001 includes impairment write-offs, following the group restructuring, totalling £22.5 million, consisting of an investment impairment of £21.9 million and an intercompany debtor write down of £564,000.
2. Operating loss after adjustment is shown before write downs (see note 1), exceptional items and amortisation of investments.
INFORMATION ON THE DEAL GROUP
The on-line advertising market
Online advertising involves using electronic banners on host websites which, when clicked, take web users directly into relevant sections of advertiser websites. Advertisers can pay host websites and/or advertising agencies on the basis of space utilised and the quantity of impressions delivered – a payment basis that is called CPM (cost per thousand impressions).
A further model is where media owners and advertising agencies were paid only when end-users performed specified actions on retailer websites. This model is called CPA (cost per action) and, by using this model, advertisers can demonstrate a direct return on their investment in on-line advertising spend.
The Deal Group
The Deal Group entered the on-line advertising market in 2000 focusing on maximising the return on clients' advertising spend. From initially placing advertising through the single UK channel of affiliate marketing via www.ukaffiliates.com, The Deal Group has established additional channels to access potential online customers by offering a comprehensive range of pricing models. The Deal Group has created long term working relationships with a number of large and varied media owners developing distinct online routes to its clients' potential on-line consumers.
The Deal Group has established a profitable operation in Spain, and has more recently established an operation in Australia.
The Deal Group focuses on the delivery of return on investment from on-line advertising budgets which involves assisting clients to formulate on-line advertising strategies. Its services also include advising on:
· media planning and buying;
· routes to customer acquisition;
· creation of efficient sales routes;
· appropriate on-line offerings;
· customer valuation;
· customer relationship management; and
· the use of parallel promotions.
The Deal Group delivers results using a combination of some or all of the following marketing channels:
· Affliate marketing (via www.ukaffiliates.com) which provides a route and technical infrastructure for advertisers to interact with a network of content-rich niche web sites (affiliates). Significant economies are afforded to both advertisers and participating website owners via the www.ukaffiliates.com website.
· Affinity marketing which provides a route and technical infrastructure for advertisers to interact with a network of medium sized web sites and small consumer portals.
· Large consumer portals.
· E-mail marketing.
· Creation of beneficial business development relationships.
· Its own sites www.thedeal.net and www.cheekymonkey.com.
The Deal Group's software provides near real time tracking and analysis of advertisers' on-line marketing campaigns to identify potential improvements and facilitate ongoing optimisation of on-line advertising campaigns. The Deal Group tracks the results of advertising campaigns by monitoring consumers' activity on advertisers’ web sites, after seeing or clicking on an advertiser’s banner.
The Deal Group's software includes a centralised administration system for delivering, tracking and optimising clients' advertising campaigns.
The financial information relating to The Deal Group set out below has been extracted from the accountants' report set out in Part III and should only be read in conjunction with the full text set out therein.
Year to31 May 2001£'000 Year to31 May 2002£'000 Year to31 May 2003£'000
Turnover 724 3,499 7,392
Gross profit 417 1,373 2,509
Operating profit/(loss) (879) 62 583
Net cash/(debt) (29) 213 359
PRINCIPAL TERMS OF THE ACQUISITION
Pursuant to the terms of the Acquisition Agreement, the Company has conditionally agreed, subject to, inter alia, Shareholder approval and Admission, to acquire the entire issued share capital of The Deal Group from the Vendors.
In consideration for the sale of the shares in The Deal Group to the Company, the Company will issue 205,221,335 Ordinary Shares to the Vendors. Under the terms of the Acquisition Agreement, certain of the Vendors have agreed that in respect of the Consideration Shares received by them, they will not sell or otherwise dispose of any interest in them as further set out below under the heading “Orderly marketing arrangements”.
CURRENT TRADING AND PROSPECTS FOR THE ENLARGED GROUP
Since the Company's year ended 31 March 2003, the launch of the Company's new automated traffic management tool for performance based search engines at Internet World has contributed to a number of significant contract wins. This new service demonstrates the Company's strategy to widen its product base from pure search engine optimisation to other forms of on-line performance based marketing.
The Directors have continued their review of potential businesses for the Company to acquire, which has resulted in the announcement today of the Acquisition, and they believe the prospects for the Enlarged Group are positive.
The Deal Group
The Deal Group's revenues have grown since its year ended 31 May 2003. In June 2003 The Deal Group launched a new premium inventory product which has generated additional revenues.
Strategy and prospects
The Proposed Board intends to continue the Company's strategy to expand its product range of on-line marketing services to service a larger proportion of its clients' on-line advertising requirements. In order to achieve this, the Proposed Board intends to investigate and, if appropriate, expand the overseas area of operation to increase the Enlarged Group's market exposure and to develop, as required, new products and services within the on-line return on investment based advertising market.
The Proposed Board will continue to review potential business acquisitions, as it believes that there may be significant opportunities within its market sector to continue to expand its operations. The Proposed Board believes there is potential for further on-line advertising growth as the number of Internet users continues to increase.
THE PROPOSED BOARD, MANAGEMENT AND EMPLOYEES
The Proposed Board
On Admission, the Proposed Board of the Enlarged Group will consist of two executive directors and three non-executive directors. Craig Lister, Richard Saul and Michael Bull will resign from the Board on Admission. The Proposed Board will therefore be as follows:
David Lees, Non Executive Chairman, aged 56
David qualified as a chartered accountant in Australia. From 1987 to 1994 he was finance director of Medeva plc. His responsibilities extended to the completion of a number of substantial acquisitions. Between 1995 and 1999 he was a non-executive founding director of SkyePharma plc and chief executive of Flare Group plc. He is currently chairman of Names.co Internet plc, Xecutiveresearch Group plc, Network Estates Limited and Metis Biotechnologies plc.
Adrian Moss, ACA, Chief Executive Officer, aged 32
Adrian qualified as a chartered accountant with Price Waterhouse in 1996. After a period in corporate finance he took a position as head of strategy and securitisation for I Group Limited with responsibility for group budgeting, negotiating funding lines and managing the execution of securitisation mortgage receivables. In 1999 he founded The Deal Group and has developed the business as chief executive officer.
Toby Smallpeice, Business Development Director, aged 31
Toby's background is in Internet, telecom and e-business, working in senior business development roles in Dione Development and Demon Internet where he was involved in product development and acquisitions. Toby subsequently managed two acquisitions of small European telecom companies for Bell Atlantic. In 1999 he founded Webgravity with Richard Saul and in 2001 he joined the Company as chief executive officer after its acquisition of Webgravity Limited.
Keith Lassman, LLB, MSI, Non Executive Director, aged 45
Keith qualified as a solicitor in 1983 and is now a senior partner in the corporate finance department of Howard Kennedy, solicitors. Keith brings considerable experience to the Proposed Board in a broad range of corporate finance transactions including acquisitions, disposals and capital raising. He is also a non-executive director of Longbridge International plc and The Wigmore Group plc (companies whose shares are traded on AIM), deputy chairman of the EIS Association and a member of the Securities Institute.
Dominic Trigg, Non Executive Director, aged 35
Dominic has a background in traditional and on-line media advertising. He is currently director of advertising operations (Europe) for Yahoo! Inc. Before this, he was media director at Music Choice Europe plc, and advertising director at MSN, Hotmail, Expedia and BT Internet. He gained traditional media experience as advertising manager for Focus magazine and BBC Worldwide.
Management and employees
The following individuals will have a significant senior management role in the operation of the Enlarged Group:
Adam Black, Brand and Communications director, aged 33
Adam is a consultant to The Deal Group and will be responsible for marketing, managing public relations initiatives and brand-related issues for the Enlarged Group. He has been with The Deal Group for four years. Prior to this he spent seven years in journalism, public relations and marketing consultancy for a number of well known companies in the UK, including Loaded magazine, IPC media, Lynne Franks PR and Freud Communications.
George Odysseos, ACA, Financial Controller, aged 32
George, a chartered accountant, joined The Deal Group in April 2000 from BDO Stoy Hayward where he qualified as a chartered accountant. George has been responsible for setting up and managing the finance function at The Deal Group and will be the financial controller for the Enlarged Group.
Tony Stubbings, Chief Technical Officer, aged 36
Tony joined The Deal Group in April 2000, previously working in systems integration and maintenance and multimedia design and network maintenance projects. Tony will be responsible for the Enlarged Group's internal system development and maintenance, platform design and development, client support and product research and development.
Nicky Iapino, Chief Operating Officer, aged *
Nicky joined The Deal Group in September 2003 as chief operating officer. She moved to The Deal Group having spent three years building Commission Junction’s UK and Ireland operation and has significant sales, marketing and operational management experience. She was previously sales manager of UKaffiliates.
IBNet currently employs 25 people based in London and The Deal Group currently employs 40 people of which 31 are based in London, 5 are in Spain and 4 are in Australia.
Key employees of the Enlarged Group will be offered the opportunity to participate in the future success of the Enlarged Group through the adoption of a proposed new IBNet share option scheme. Current employees of The Deal Group holding options over shares in The Deal Group will be offered the opportunity to be granted new options over shares in IBNet in place of existing options over shares in The Deal Group. It is not anticipated that any options granted by the Company will exceed in aggregate 10 per cent. of the issued share capital of the Company at any one time.
The Proposed Board recognises the value of the Combined Code and they will take appropriate measures to ensure that the Enlarged Group complies with the Combined Code, where appropriate for a public company of its size.
The Company has established an audit committee and a remuneration committee, which will continue to operate following Admission, with formally delegated duties and responsibilities. Both of these committees consist of at least two non-executive directors, where possible, and following Admission will be chaired by David Lees and Keith Lassman respectively and will meet at least twice a year.
The audit committee will, inter alia, determine the terms of engagement of the Enlarged Group's auditors and will determine, in consultation with the auditors, the scope of the audit. It will receive and review reports from management and the Enlarged Group's auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Enlarged Group. The audit committee will have unrestricted access to the Enlarged Group's auditors.
The remuneration committee will, inter alia, review the scale and structure of the executive directors' remuneration and the terms of their service contracts, including share option schemes. The remuneration and the terms and conditions of the non-executive directors will be set by the board of the Enlarged Group from time to time.
The Company has adopted the Model Code for companies, as defined under the listing rules of the UK Listing Authority, governing directors' share dealings and will take proper steps to ensure compliance by the board of the Enlarged Group from time to time.
THE PLACING, ADMISSION TO AIM AND CAPITAL REORGANISATION
Details of the Placing
The Company proposes to raise up to approximately £1.2 million (net of expenses) by issuing 51,319,648 Placing Shares at 3.41p per share. The net cash proceeds from the Placing will provide additional working capital for the Enlarged Group and will fund the costs relating to the Acquisition and Admission of the Enlarged Group.
It is expected that the proceeds of the Placing will be received by 20 October 2003. In the case of placees requesting Placing Shares in uncertificated form it is expected that the appropriate CREST accounts of placees will be credited with the Placing Shares comprising their Placing participation on 20 October 2003. In the case of placees requesting Placing Shares in certificated form, it is expected that certificates in respect of the Placing Shares will be despatched by post within seven days of Admission.
Application has been made for the Enlarged Issued Share Capital to be admitted to trading on AIM. It is expected that Admission to trading on AIM will become effective and that dealings in the Enlarged Issued Share Capital will commence on 20 October 2003. The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares.
Orderly marketing arrangements
Each member of the Proposed Board who owns or, will on Admission, own Ordinary Shares has agreed that, under the terms of the Placing Agreement, he will not sell or otherwise dispose of any interest in the share capital of the Enlarged Group for a period of 12 months from Admission, other than in certain specified circumstances.
In addition, certain of the Vendors (other than members of the Proposed Board) have agreed that, in respect of the Consideration Shares received by them, they will not sell or otherwise dispose of any interest in them for a period of between three and six months from Admission, other than in certain specified circumstances.
The Ordinary Shares are eligible for CREST settlement. Accordingly, settlement of transactions in the Existing Ordinary Shares and the New Ordinary Shares following Admission may take place within the CREST system if the relevant shareholder so wishes. CREST is a voluntary system and shareholders who wish to receive and retain share certificates will be able to do so.
It is the intention of the Proposed Board to review the Company's dividend policy in light of the Enlarged Group's financial progress and the availability of distributable reserves. The Company is currently unable to pay dividends due to the deficit on its profit and loss account. The Company is therefore proposing the Capital Reorganisation so that the Proposed Board is in a position to pay dividends when it believes it is prudent to do so.
The Company is currently unable to pay any dividends as a result of the deficit which exists on its profit and loss account. Accordingly it is proposed that the deficit on the profit and loss account will be eliminated by the following:
Purchase and cancellation of the Deferred Shares
The Company completed a capital reorganisation in January 2002, splitting each of the Company's then issued ordinary shares of 25p each into one 1p Ordinary Shares and one 24p Deferred Share. As set out in the related circular to Shareholders dated 13 December 2001, the Company now intends, subject to Shareholder approval, to purchase the 54,952,000 Deferred Shares, out of the Placing proceeds, for an aggregate consideration of 1p and cancel them, thereby reducing the aggregate nominal value of shares then in issue by £13.2 million such amount being transferred to a capital redemption account.
As the Company does not have sufficient distributable reserves to currently pay a dividend, it is proposed to create the necessary reserves after the Deferred Shares have been bought back by cancelling the Company's share premium and capital redemption accounts. Following Admission and the issue of the New Ordinary Shares and after the Deferred Shares have been purchased by the Company, the amount standing to the credit of the capital redemption account will be £13.2 and the amount standing to the credit of the share premium account will be £19.8. The Company's current deficit on its profit and loss account is £28.3. Accordingly, the Company intends to apply to the Court to cancel its share premium and capital redemption account. This requires the approval of Shareholders by special resolution which will be sought at the EGM. The cancellation of capital will also require the sanction of the Court. Prior to confirming this, the Court will need to be satisfied that the interests of the Company's creditors will not be prejudiced, and the Company will put into place such creditor protections as the Court may require.
Subject to Shareholder approval and the sanction of the Court, the amount of the cancellation will then be used to eliminate the Company's deficit on its profit and loss account, with the excess amount being used to create distributable reserves of £4.7 million.
Capitalisation of Loan Stock
The Company currently owes Toby Smallpeice and Richard Saul in aggregate £931,273 pursuant to the Loan Notes. Toby Smallpeice has agreed to capitalise £200,000 of the Loan Stock held by him on Admission in exchange for the issue of 5,865,103 New Ordinary Shares at the Placing Price and to be repaid the balance in equal monthly payments over the next 42 month period commencing 6 months after Admission. The Loan Stock held by Richard Saul will be repaid in equal monthly instalments over the 12 months following Admission.
A circular to IBNet shareholders is being posted today regarding the above proposals and including a notice convening an EGM to be held on 17 October 2003 at 11.15 am to seek shareholder approval. The directors of IBNet and certain other shareholders have undertaken to vote in favour of the resolutions in respect of holdings totalling 48,522,912 Existing Ordinary Shares representing approximately 55.17 per cent of the current issued ordinary share capital of the Company.
Copies of the circular will be available from the offices of KBC Peel Hunt at 111 Old Broad Street, London EC2N 1PH from today until one month from admission of the Enlarged Group to AIM.
The details regarding the Proposed Directors required by the AIM Rules under paragraph (f) of Schedule 2 are as follows:
Name Current Directorships Past Directorships
Keith Lassman Affiliate Marketing Limited Snugbug Limited
E-mortgages Limited Wishinghurst Limited
Finance-direct.com Limited Downing Classic VCT plc
First National Property U-Store Limited
Maintenance Limited U-Storage Limited
Howard Kennedy (partnership) United Storage plc
Longbridge International Plc
The Deal Group Limited
The EIS Association Limited
Wigmore Group Plc
Adrian Moss The Deal Group (Marketing)Limited
The Deal Group Limited
The Deal Group Media Limited
Deal Group Media S.L.
Deal Group Media Pty Ltd
Affiliate Marketing Limited
Dominic Trigg The Deal Group Limited None
- Ends -
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