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REG - Public Policy Hldg - Acquisition & Expansion of Credit Facility

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RNS Number : 4988R  Public Policy Holding Company, Inc.  07 June 2024

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via a Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.

 

Public Policy Holding Company, Inc.

 

("PPHC", the "Company" or the "Group")

 

Acquisition of Pagefield and Expansion of Credit Facility

 

Earnings-accretive acquisition in London expands Group presence
internationally

 

Public Policy Holding Company (AIM: PPHC), the government relations and public
affairs group providing clients with a fully integrated and comprehensive
range of services, is pleased to announce that it has acquired Pagefield
Communications Limited ("Pagefield"), a premier London-based strategic
communications and cross-party public affairs advisory firm (the
"Acquisition"), for an initial consideration of £16.2 million.

 

Until now, PPHC's nine operating companies have been solely based in the US,
although its c.1,200 clients - including nearly half of the Fortune 100 - are
global by nature. Alongside organic growth, as outlined at the time of its IPO
in December 2021 and reiterated since, PPHC has been targeting acquisitions
within the key political capitals of London and Brussels, as well as more US
states, in order to broaden its geographic reach and policy expertise.

 

Since IPO, PPHC has acquired three businesses in the US, with Pagefield
becoming its first international acquisition and the 10(th) brand to sit under
the Group's broad umbrella, which encourages the cross-selling of services
between operating companies to augment organic growth.

 

Founded in 2010 by Mark Gallagher, Oliver Foster and Sara Price and based in
London, England, Pagefield is led by Foster, CEO, and has 36 full-time
employees. Mr. Foster will continue as CEO, and Mr. Gallagher and Ms. Price
will remain with the business as senior advisers. Pagefield's clients include
corporations and organisations campaigning on issues of local, national and
global importance.

 

Acquisition highlights

·      The Acquisition is in line with the Group's growth strategy of
considered M&A into key geographies and industry/policy specialisations.

·      As a wholly-owned subsidiary of PPHC, Pagefield will retain its
distinct brand identity and its long-standing executive, senior management
team and employees.

·      Significant revenue and profit synergy potential exists via the
referral to and from the existing Group, which has over 1,200 clients.

·      The initial consideration of £16.2 million has been funded 93%
(£15.1 million) in cash and 7% (£1.1 million) through the issue of new
common shares in PPHC to the shareholders of Pagefield (the "New Common
Shares").

·      Further earnout payments are contingent on Pagefield achieving
profit growth targets, promoting alignment with the Group's broader growth
objectives.

·      The Acquisition is accretive to underlying earnings per share.

 

Overview of Pagefield

·      Pagefield is a leading strategic communications and cross-party
public affairs advisory firm in the UK, which is measured as the 6(th) largest
global economy and, along with the EU, is at the forefront of global policy
issues including technology regulation, energy transition/green energy and
other environmental regulations.

·      A cross-party consultancy, Pagefield helps clients navigate the
UK's complex legislative and regulatory environment and is known for
high-level reputation, issues management and strategic communication campaigns
- tapping into the team's deep familiarity with the UK's political, business
and media landscape.

·      Practice areas of expertise are Public and Regulatory Affairs,
Public Relations, Campaigning and Digital & Social Media. This aligns with
the Group's offerings of Government Relations and Public Affairs.

·      Pagefield's clients include some of the world's premier brands,
established listed companies, fast-moving start-ups and challengers, inspiring
charities and individuals.

·      For the year ended 31 December 2023, Pagefield recorded
(unaudited) net revenues of £6.0 million, growing at an average rate of 10%
for the past three years. Profit before tax amounted to £2.3 million, after
application of post-completion compensation policy.

 

Key terms of the Acquisition

·      The initial consideration of £16.2 million has been funded by
£15.1 million paid in cash and the balance of £1.1 million being satisfied
by the issuance of 897,640 New Common Shares of $0.001 each at a price of
£1.2561 per New Common Share. Shares issued to the shareholders of Pagefield
("Sellers") will be subject to a four-year lock-in period and the Sellers will
additionally be subject to certain restrictive covenants. Certain additional
payments may be made to the Sellers to the extent that Pagefield benefits from
some specified tax relief and other benefits.

·      In addition to the initial consideration, a further earnout
payment could be made after the end of 2025, capped at £6.3 million,
contingent on Pagefield achieving average profit after tax for the two years
ended 31 December 2025 above an agreed hurdle. Any payment, would be satisfied
through a mix of 65.4% paid in cash and 34.6% through the issue of equity.

·      Finally, and integral to the transaction, incentive programmes
have been agreed for Mr. Foster and the leadership team. These incentive
programmes will reward these participants based on the growth in profit after
tax for the five years to 31 December 2028. Any payments under such
programmes will be payable in 2029 up to a maximum of £7.5 million and will
be paid 60% in cash and 40% in equity.

·      Taking into account these three payments, the maximum aggregate
consideration that could be payable would be £30 million. This maximum would
only be payable in the event that Pagefield were to achieve significant growth
in profit after tax.

·      Unaudited net assets of Pagefield at completion amount to
approximately £0 million.

 

Expansion of bank facilities

·      In order to support with the financing of the initial cash
element of the Acquisition, the Group announces it has expanded the Senior
Secured Supplemental Credit Facility with Bank of America (the "Facility"),
which was recently entered into on April 30th 2024, from $13 million to $25
million. Of this facility, $6 million had been deployed for the recent
acquisition of Lucas Public Affairs, and the remaining balance of $19 million
has been drawn to fund the cash element of the initial consideration of
Pagefield.

·      As previously communicated, the interest rate payable on this
Supplemental Credit Facility is the Secured Overnight Financing Rate (SOFR)
plus 260 basis points, and the Facility will mature on 30 April 2028.

·      The Group reaffirms its commitment to maintaining a prudent
leverage ratio as it executes on a dual-track strategy of organic growth and
M&A. The Group's ability to maintain M&A financing flexibility
facilitates its wider capital allocation policy, which includes dividend
payments. Following the Acquisition, the effective debt position of the Group
will be approximately $35 million before taking into account the Group's
evolving cash balance. The Group considers this to be a conservative level
relative to its reported underlying EBITDA of $35.1 million for the year ended
31 December 2023 and cash from operations of $21.6 million.

 

Issue of New Common Shares

As part of the initial consideration payable, 897,640 New Common Shares
of $0.001 each are issued to the Sellers. An application will be made for
the New Common Shares, which will rank pari passu with the existing Common
Shares in issue, to be admitted to trading on AIM ("Admission"). Dealings are
expected to commence on or around 12 June 2024.

 

Following this issue of shares, the Group's total issued and voting share
capital upon Admission will consist of 119,279,632 Common Shares. This figure
may be used by shareholders as the denominator for the calculations by which
they will determine if they are required to notify their interest in, or a
change to their interest in, securities of the Group.

 

Stewart Hall, CEO of PPHC, commented:

 

"We have been targeting international M&A, particularly into the key
political capitals of London and Brussels, since IPO. In Pagefield, we have
acquired a high-quality business with outstanding people and a sought-after
client base. Our clients are global by nature, present in multiple geographies
and it is essential that we can support them wherever they operate.

 

"Pagefield stands to benefit greatly from our ability to cross refer business
while our US-based operating companies will equally benefit from its expertise
and deep familiarity with the UK's political, business and media landscape. As
a UK listed company, we welcome Pagefield into the PPHC Group and look forward
to working with Pagefield as we deliver value for our shareholders.

 

"Finally, our pipeline of acquisition opportunities under development remains
healthy and we retain a strong balance sheet which gives us the resources to
continue to pursue our M&A strategy alongside organic growth."

 

 Oliver Foster, CEO of Pagefield, commented:

 

"We are delighted to be joining the PPHC family whilst maintaining the
Pagefield brand, ethos and values. This next phase in our growth will open up
a huge well of professional - and international - expertise to our clients. We
already advise and represent a number of international clients in the UK and
PPHC works with a number of UK clients in the US.

 

"Therefore, the long-term client benefits were crystal clear from the moment
we began our discussions and the opportunities for professional collaboration
to add further value to current, new and shared clients is incredibly
exciting."

 

Mark Gallagher, Co-Founder of Pagefield, added:

 

"I am thrilled that we have found a terrific new home for Pagefield and our
exceptional team - a prerequisite for the future of a company we founded some
fourteen years ago. Today we are laying the foundation stone of what I have no
doubt will be a transatlantic PR powerhouse. As founders of the business, Sara
and I are also delighted to maintain our involvement in Pagefield and to have
a stake in the future success of PPHC as a whole."

 

For further information contact:

 

 Public Policy Holding Company, Inc.            +1 (202) 688 0020

 Stewart Hall, CEO                              enquiries@pphcompany.com (mailto:enquiries@pphcompany.com)

 Roel Smits, CFO

 Thomas Gensemer, Chief Strategy Officer

 Stifel (Nominated Adviser & Joint Broker)      +44 (0) 20 7710 7600

 Fred Walsh, Ben Good

 Stifel (Capital Solutions Group)

 George Moore-Gywn, Josh Rodgers

 Zeus Capital (Joint Broker)                    +44 (0) 20 3829 5000

 Alice Lane, David Foreman

 Buchanan Communications (Media Enquiries)      +44 (0) 20 7466 5000

 Chris Lane, Toto Berger                        pphc@buchanan.uk.com (mailto:pphc@buchanan.uk.com)

 

About PPHC

Incorporated in 2014, PPHC is a US-based government relations and public
affairs group providing clients with a fully integrated and comprehensive
range of services including government and public relations, research, and
digital advocacy campaigns. Engaged by approximately 1200 clients, including
companies, trade associations and non-governmental organisations, the Group is
active in all major sectors of the US. economy, including healthcare and
pharmaceuticals, financial services, energy, technology, telecoms and
transportation. PPHC's services support clients to enhance and defend their
reputations, advance policy goals, manage regulatory risk, and engage with US
federal and state-level policy makers, stakeholders, media, and the public.

 

PPHC operates a holding company structure and currently has ten operating
entities in the US and UK. Operating in the strategic communications market,
the Group has a strong track record of organic and acquisitive growth, the
latter focused on enhancing its capabilities and to establish new verticals,
either within new geographies or new related offerings.

 

For more information, see www.pphcompany.com (http://www.pphcompany.com/) .

 

 

 

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