REG - XLMedia PLC - Proposed divestment of North America Business
21/10/2024 07:00
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RNS Number : 8598I XLMedia PLC 21 October 2024
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FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014. Upon the publication of this announcement, this
information is now considered to be in the public domain.
21 October 2024
XLMedia PLC
("XLMedia" or the "Company" or the "Business")
Proposed divestment of North America Business
and
Notice of General Meeting
XLMedia (AIM: XLM), a sports digital media company, is pleased to announce
that it has entered into a conditional asset purchase agreement (the "APA")
for the sale of certain assets that constitute the Company's North America
Business (the "North America Disposal") to Sportradar AG.
Transaction Highlights
· Conditional agreement to dispose of the North America Business for up
to $30.0 million in cash:
o $20.0 million payable on Completion; and
o Up to an additional $10.0 million payable in April 2025, subject to
performance.
· The transaction is subject to approval by Shareholders at the General
Meeting to be held on 7 November 2024 and expected to complete shortly
thereafter.
· Sportradar AG has received irrevocable undertakings from Premier
Investissement SAS and the Directors representing approximately 31.18 per cent
of the Ordinary Share capital to instruct a vote in favour of the Resolution.
· Following Completion, XLMedia will become an AIM Rule 15 Cash Shell,
focused solely on the orderly distribution to Shareholders of the proceeds
from the North America Disposal and the previously announced sale of the
Company's Europe and Canada assets ("Europe Disposal").
· The Revenue and Estimated Adjusted EBITDA 2023 attributable to the
North America Business for the year ended 31 December 2023 was $27.5 million
and $5.5 million respectively.
· The total consideration for the North America Disposal represents an
implied value of up to 8.8p per Ordinary Share and a multiple of 5.5 times
Adjusted EBITDA 2023 for the North America Business.
· Total consideration for both the North America Disposal and the
previously announced Europe Disposal, including all earnout payments due,
would generate up to $72.5 million in cash before costs and liabilities.
The Board is committed to providing value to shareholders of XLMedia and
therefore has continually sought to evaluate strategic options available to
the Company. On 15 December 2023, the Board stated it was exploring the
opportunity to create shareholder value through possible sale of assets and
was having some early discussions with potential purchasers.
The Board is aware that the value of its individual businesses was not being
fully reflected in its share price, and therefore concluded that the strategic
sale of certain assets would result in delivering the most value to
shareholders. Following two smaller asset disposals, on 21 March 2024 the
Company announced the Europe Disposal for a total consideration up to $42.5
million.
Following the Europe Disposal, the North America Business became the sole
material asset in the Group and the Board focussed on maximising the growth of
this business. However, while it was confident that the US market would
provide long term success for a larger orgainisation, the Board believes
XLMedia's current scale on a standalone basis could impact its ability to
compete in the evolving US market. In addition, the Board is also mindful that
following the Europe Disposal, the continuing business of the North America
Business may be considered too small to remain listed.
The Board, management and staff have worked hard to successfully integrate the
three acquired entities to create the North America Business, including the
development of the Media Partners Business and the strong relationships with
the major US operators. However, the growth of its US revenue streams did not
match the Group's original plans. Due to the obligation to fund the historical
US acquisitions out of cash generated from trading, some of which occurred in
a high-value market, the Group has been limited in its ability to participate
in further acquisitions and has instead focused on growing the existing Owned
and Operated footprint and expanding the Media Partnership Business roster of
partners.
When assessing the value of the North America Business, the Board has
primarily taken into account the future revenue, profitability and free cash
flow of the North America Business assets as well as the value of the
technology, relationships and brands to an acquiror.
The Board considers that Sportradar's offer represents a fair net present
value for the stand alone North America Business's future revenue and
profitability.
A circular detailing the North America Disposal, the General Meeting and
actions to be taken in respect of the General Meeting will shortly be posted
to Shareholders (the "Circular") which contains the Notice of the General
Meeting. The Circular will also be available to view on the Company's website:
www.xlmedia.com (http://www.xlmedia.com/)
Unless otherwise defined, capitalised terms shall have the same meaning as
those in the Definitions Section contained in this announcement.
Marcus Rich, Chairman of XLMedia, commented:
"In an ongoing commitment to maximise shareholder value, following the Europe
Disposal, the Board is pleased to have reached an agreement to sell the North
America Business to Sportradar pending shareholder approval. We anticipate an
initial distribution from the net proceeds to shareholders before year end."
For further information, please contact:
XLMedia plc ir@xlmedia.com
David King, Chief Executive Officer
Peter McCall, General Counsel and Company Secretary
www.xlmedia.com (http://www.xlmedia.com/)
Cavendish Capital Markets Limited (Nomad and Broker) Tel: 020 7220 0500
Giles Balleny / Callum Davidson
www.cavendish.com (http://www.cavendish.com/)
About XLMedia:
XLMedia (AIM: XLM) is a sports digital media company that creates compelling
content for highly engaged audiences and connects them to relevant
advertisers.
The Group manages a portfolio of premium brands in regulated markets which are
designed to reach passionate people with the right content at the right time.
Forward Looking Statements
This announcement contains forward-looking statements. Forward-looking
statements are neither historical facts nor assurances of future performance.
They are based only on our current beliefs, expectations and assumptions
regarding the future of our business, future plans and strategies,
projections, anticipated events and trends, the economy and other future
conditions. Because forward-looking statements relate to the future, they are
subject to inherent uncertainties, risks and changes in circumstances that are
difficult to predict and many of which are outside of our control. Our actual
results and financial condition may differ materially from those indicated in
the forward-looking statements. Therefore, Shareholders should not rely on any
of these forward-looking statements.
Expected Timetable of Principal Events
Event
Publication of the Circular On or around 21 October 2024
Latest time and date for receipt of Forms of Proxy and CREST voting 9.00 a.m. on 5 November 2024
instructions
General Meeting 9.00 a.m. on 7 November 2024
Announcement of the result of the General Meeting 7 November 2024
Expected completion date of the Proposed Transaction* 12 November 2024
Notes:
1. Each of the times and dates above are indicative only and are subject
to change. If any of the above times and/or dates change, the revised times
and/or dates will be notified by the Company to Shareholders by announcement
through a regulatory information service.
2. All the above times refer to London time unless otherwise stated.
* Subject to completion of all of the conditions set out in the Asset Purchase
Agreement.
1. Introduction
The Board of XLMedia PLC announces that it has entered into a conditional
asset purchase agreement (the "APA") for the sale to Sportradar AG of certain
assets that constitute the Company's North America Business.
The consideration for the North America Disposal is up to $30.0 million in
cash for the assets to be sold free from encumbrance on Completion. Of this,
$20.0 million is payable on Completion with the balance of up to a further
$10.0 million payable by in April 2025 subject to performance of the North
America Business. Further details on the structure of the consideration
payable to the Group are set out in paragraph 5 of this announcement.
The consideration of up to $30.0 million for the North America Business
represents an implied value of up to 8.8p per Ordinary Share based on the
current issued share capital (based on the current exchange rate). As set out
in the Results for the six months ended 30 June 2024, cash on the balance
sheet at 30 June 2024 was $19.4 million which represents 5.8p of Ordinary
Share (based off the exchange rate as at 30 June 2024) and primarily relates
to the first payment of $20.0 million less costs of $2.0 million for the
Europe Disposal. The share price of the Ordinary Shares on 20 March 2024, the
day prior to the announcement of the Europe Disposal, was 6.25p.
The Revenue and Estimated Adjusted EBITDA 2023 attributable to the North
America Business for the year ended 31 December 2023 was $27.5 million and
$5.5 million respectively. The total consideration of $30.0 million represents
a multiple of 5.5 times Adjusted EBITDA 2023 of $5.5 million for the North
America Business. As set out in the Results for the six months ended 30 June
2024, the North America Business contributed unaudited revenue of $9.8
million, in line with management expectations.
On 21 March 2024, the Company announced the Europe Disposal for a total
consideration of up to $42.5 million. To date, it has received $30.0 million
from this transaction with a final payment of $7.5 million together with any
earnout consideration (up to a maximum of $5.0 million) due to be paid on 2
April 2025. The North America Disposal, if approved, will therefore result in
the divestment of substantially all of the Company's existing business, assets
and trade liabilities from Completion.
Following Completion, the Company will become an AIM Rule 15 Cash Shell and
does not propose to make an acquisition that constitutes a reverse takeover
under AIM Rule 14 or become an investing company. However, the Board does not
propose to seek cancellation of the Company's admission to trading on AIM at
this point as it believes that it is in the best interests of shareholders
that the Company remains admitted to trading until the final consideration
payments for each of the Europe Disposal and the North American Disposal are
received and a significant proportion of the consideration from the disposals
has been distributed to shareholders.
As the Company does not propose to make an acquisition that constitutes a
reverse takeover under AIM Rule 14 or become an investing company,
Shareholders should be aware that, in accordance with AIM Rule 15, it is
expected that trading in the Ordinary Shares will be suspended on or around 12
May 2025. The Company will then have a further six months following the date
of suspension before the Company's admission to trading on AIM is cancelled.
The Directors' current expectation is that the Company will have taken steps
to effect cancellation of its admission to trading on AIM by this time.
Upon receipt of the final deferred consideration payments for both the North
America Disposal and the Europe Disposal including all earnout payments due,
the disposals of the assets of the business in 2024 are expected to generate
up to $72.5 million before costs and liabilities. Based on the existing issued
share capital, this is equivalent to an implied gross value per share of up to
21.2p (based on the current exchange rate) compared to a closing mid-market
share price of 6.6p on 15 December 2023 when the Board confirmed it was
exploring the opportunity to create shareholder value through asset sales.
The Board intends to make an initial distribution to shareholders from
available capital in Q4 2024, the amount of which will be determined after
providing for the ongoing costs and working capital requirements of the
residual runoff business and outstanding liabilities (including historical tax
liabilities). Further details of this distribution from capital will be
published by the Company at an appropriate time.
As the North America Disposal constitutes a fundamental change of business of
the Company, this requires the approval of a majority of Shareholders voting
in person or by proxy at the General Meeting.
Accordingly, Completion is conditional upon, inter alia, the passing of the
Resolution by Shareholders at the General Meeting. As set out in more detail
at paragraph 10 below, Sportradar AG has received irrevocable voting
undertakings to vote in favour of the Resolution from certain Shareholders
(including the Directors in respect of their own shareholdings in the Company)
representing in aggregate approximately 31.18 per cent of the Ordinary Share
capital. Further detail on the conditions to Completion are set out in the
summary of the APA in paragraph 5.
A notice convening a General Meeting for 9.00 a.m. GMT on 7 November 2024 at
the offices of Cavendish Capital Markets at One Bartholomew Close, London EC1A
7BL, is set out at the end of the Circular.
2. About XLMedia
XLMedia was founded as a performance marketing business for the online gaming
industry in Europe and over time it built a strong business around its sites
including Freebets.com, WhichBingo.co.uk, Nettikasinot.com and Vedonlyonti.com
based on a revenue share model. However, the business was dependent on search
engine optimisation to promote its sites on Google searches and on 18 January
2020, the Company became aware that a number of its online affiliate casino
sites had received manual actions by Google, which impacted the visibility of
the sites and their ability to generate meaningful levels of online traffic,
and hence revenues, from new visitors. The Group began a restructuring to
reduce the number of sites and focus on raising the quality of the content on
the sites to make it more relevant and engaging and, over the following years,
the Group stabilised this part of the business.
As part of the restructuring the Company looked at other markets and in
particular identified the nascent US sports betting market. In December 2020,
the Group made its first acquisition of a US sports betting business CBWG
Sports ("CBWG"). Over the next year it acquired a further two assets, Sports
Betting Dime (March 2021) and Saturday Football Inc. (September 2021). As
individual states began to legalise sports betting and the market began to
mature, the Group worked with Operators in US sports betting market to acquire
customers. In FY 2023, this division delivered revenue of $27.5 million.
Revenue and Adjusted EBITDA by vertical 2023
3. 4. Revenue 6. Adjusted EBITDA
5. ($m) 7. ($m)
8. North America 9. 27.5 10. 5.5
11. Europe 12. 22.8 13. 6.6
14. Total 15. 50.3 16. 12.1
Background to the North America Business
Online sports betting had historically been prohibited in the United States
under Professional and Amateur Sports Protection Act but following its repeal
in 2018 by the Supreme Court, individual states were free to legislate to
permit sports betting. As a provider of performance marketing services, it was
a strategic move for XLMedia to seek to position itself to capture some of
this growing market and, like many of its European rivals, it looked to make
acquisitions of some of the early sports betting sites and sports focussed
publishers. It was anticipated that the US sports betting market would be very
significant but at the time of the Company's first acquisition in December
2020 only 12 states had regulated and launched statewide online sports
betting, including New Jersey which was one of the first to legalise.
CBWG
The Company's first acquisition in December 2020 was the sports betting and
gaming business, CBWG. Based in the northeast United States, it focused on
professional and college sports news coverage, sports betting and online
casino and was registered as a sports gaming affiliate in six states,
including New Jersey and Pennsylvania. The business owned and operated sports
and gaming assets including CrossingBroad.com, PASportsBooks.com,
BetNewJersey.com, and EliteSportsNY.com. CBWG also had an agency arm, which
partnered with leading sports media brands to drive user acquisition in the
regulated betting markets outside of its key focus. This agency business grew
into what was later referred to as the Media Partnership Business, providing
an additional channel for the Company's content.
Sports Betting Dime
The Group's second acquisition was Sports Betting Dime in March 2021, a
leading offshore affiliate sports betting brand and website with a national US
presence that had over 1.2m monthly visitors (January 2021). The website
provided a content rich resource for sport bettors with data and tools for
novices and experts, including the latest betting odds, trends, reports,
futures trackers, and analysis, and how-to betting guides. Sports Betting
Dime covered the core US sports of NFL, NBA, MLB and NHL as well as MMA, golf
and college football.
Although its traffic was countrywide, the site was initially only able to
monetise traffic in the nine regulated US states where XLMedia operated, but
over time, Sports Betting Dime was able to operate in the widening US market
as it regulated on a state-by-state basis.
Saturday Football Inc.
In September 2021, the Group made its final US acquisition with the purchase
of Saturday Football Inc., a former agency partner. Saturday Football Inc.
operated two leading college football media sites, saturdaydownsouth.com
(http://www.saturdaydownsouth.com/) and saturdaytradition.com
(https://saturdaytradition.com/) , which covered the popular Southeastern
Conference and Big Ten college sports conferences. The addition of Saturday
Football Inc. was intended to provide access and reach across the South and
Midwest States, including markets yet to legalise sports betting as well as
access the sizable US College Football marketplace, which was highly
complementary to the Group's existing US sports vertical.
Current Status of the US Market and XLMedia's North America Business
The Group currently operates in 21 states with legalised online sports
betting. There are 30 states that are live, legal and 20 states yet to
legalise online sports betting, including California and Texas, the two most
populous states. The Group does not participate in nine of these states due to
limited affiliate opportunity (for example single operator monopoly (Florida)
or in-person registration requirements (Nevada)). Of those states that are not
yet live, legal for online sports betting, one is in active ballot discussions
(Missouri) as at September 2024. In addition, the Group currently operates in
four states with legalised online casino wagering. There are only seven states
that are live, legal and 43 yet to legalise online casino. While only a small
portion of the North America revenue is attributed to online casino, it
presents an opportunity in the long-term which the Group seeks to address over
time with its recently created online casino website.
The revenues from the XLMedia North America Business are from a combination of
its Owned and Operated sites ("O&O") and its Media Partnership Business
("MPB"), a collective of sports media and news publishers which management
judge to have high brand equity, trust and authority. O&O brands provide
news, insights and betting entertainment from in-house experts that generates
audience growth and retention, while Media Partners benefit from XLMedia's
quality storytelling, industry expertise and operator relationships. The scale
of this combination yields wider geographical coverage, increased advertiser
relevance and greater revenue opportunities.
The Group's O&O portfolio of brands is targeted at high intent sports
bettors and sports fans looking for rich specialist content. The brands and
websites that the Company has acquired and expanded have engaged with
audiences, especially in legalised states to drive affiliate revenue, across
the portfolio. The principal websites include:
· Saturday Down South and Saturday Tradition which primarily cover US
college football with emphasis on the US Southeast and Midwest regions.
· Sports Betting Dime which primarily covers the major US professional
leagues across all US states.
· Crossing Broad which primarily covers US professional and college
sports in Pennsylvania with additional coverage in the US Northeast region.
The Group's MPB has allowed the Company to broaden its audience to well beyond
that of its own sites, and in exchange for this audience reach, some of the
revenues from the content provided by XLMedia is shared with the Media
Partner. The partnership model is a core competency of XLMedia and an approach
which has had repeated success. Media Partners have either a national
footprint or regional footprint with some having a sports-only focus.
In the period since acquisition of its assets, a number of key states have
launched online sports betting, including Arizona (September 2021), New York
(January 2022), Kansas (September 2022), Ohio (January 2023), Massachusetts
(March 2023) and North Carolina (March 2024). However, as the US market
developed, it became clear that sports betting operators would increase their
marketing spend in a state during the run up to that state's launch of online
sports betting in order to build market share and that the baseline spend in
already legalised states would be lower. This led to significant spikes of
revenue in the run up to, and shortly after, key state launches, with operator
spend normally reflecting the size and importance of the state. The market
also remains strongly seasonal with the NFL season from September to February
being the heaviest betting period during a year. In 2023, Americans wagered
over $119.0 billion on sports betting with $40.0 billion in the last four
months of the year accounting for 34% of wagers(1). For the 2024 NFL Super
Bowl in February, it was estimated that 50 million Americans wagered $16.0
billion on the event(2).
The US market currently remains a predominantly cost per acquisition ("CPA")
market with a relatively small number of operators lessening competition
between them to acquire new customers. The Group has sought to develop more
predictable income by seeking to shift to revenue share or hybrid models like
those used predominantly in the European gaming market. These structures,
while reducing the initial up front value to the Company, provide an ongoing
percentage of the net revenue from the acquired customer over the life of that
customer. While the US market has been slow to adopt this shift and it is not
legal in all states where betting is permitted, over time it would smooth the
effect of customer acquisition and seasonality.
As a result of the performance of the acquired assets since acquisition and
following the 2023 annual impairment review, the Group concluded that it was
necessary to write down the carrying value of North America assets by
approximately $57.3 million. The new carrying value reflected the uncertainty
over the timing and level of future revenues, particularly from state
launches, and in particular the requirement to discount future cashflows at
25%.
3. Background to and Reasons for the Proposed Transaction
The Board is committed to providing value to shareholders of XLMedia and
therefore has continually sought to evaluate strategic options available to
the Company. On 15 December 2023, the Board stated it was exploring the
opportunity to create shareholder value through the possible sale of assets
and was having some early discussions with potential purchasers.
The Board is aware that the value of its individual businesses was not being
fully reflected in its share price, and therefore concluded that the strategic
sale of certain assets would result in delivering the most value to
shareholders. Following two smaller asset disposals, on 21 March 2024 the
Company announced the Europe Disposal for a total consideration up to $42.5
million.
Following the Europe Disposal, the North America Business became the sole
material asset in the Group and the Board focussed on maximising the
performance of this business. However, while it was confident that the US
market would provide long term success for a larger organisation, the Board
believes XLMedia's current scale on a standalone basis could impact its
ability to compete in the evolving US market. In addition, the Board is also
mindful that following the Europe Disposal, the continuing business of the
North America Business may be considered too small to remain listed.
The Board, management and staff have worked hard to successfully integrate the
three acquired entities to create the North America Business, including the
development of the Media Partners Business and the strong relationships with
the major US operators. However, the growth of its US revenue streams did not
match the Group's original plans. Due to the obligation to fund the historical
US acquisitions out of cash generated from trading, some of which occurred in
a high-value market, the Group has been limited in its ability to participate
in further acquisitions and has instead focused on growing the existing
O&O footprint and expanding the MPB roster of partners.
Value of the Proposed Transaction
The consideration for the North America Disposal is up to $30.0 million in
cash. Of this, $20.0 million is payable on Completion with up to a further
$10.0 million payable by the end of April 2025 subject to performance of the
North America Business during the 2024 financial year.
The consideration of up to $30.0 million for the North America Business
represents an implied value of up to 8.7p per Ordinary Share based on the
current issued share capital and based on the current exchange rate. As set
out in the Results for the six months ended 30 June 2024, cash on the balance
sheet at 30 June 2024 was $19.4 million which represents 5.8p of Ordinary
Share (based on the exchange rate on 30 June 2024) and primarily relates to
the first payment of $20.0 million less costs of approximately $2.0 million
for the Europe Disposal. The share price of the Ordinary Shares on 18 October
2024 was 9.3p.
The Revenue and Estimated Adjusted EBITDA attributable to the North America
Business for the year ended 31 December 2023 was $27.5 million and $5.5
million respectively. The total consideration of $30.0 million represents a
multiple of 5.5 times Adjusted EBITDA 2023 of $5.5 million for the North
America Business.
When assessing the value of the North America Business, the Board has
primarily taken into account the future revenue, profitability and free cash
flow of the North America Business assets as well as the value of the
technology, relationships and brands to an acquiror.
The Board considers that Sportradar's offer represents a fair net present
value for the North America Business's future revenue and profitability.
When making its decision, the Board also took the following matters into
consideration:
1. scale required to be a standalone affiliate business operating only in
the US market;
2. assessment of other potential interest and comparator transactions; and
3. suitability of the Group continuing as an AIM listed company following
the Europe Disposal.
Summary
Based on the valuation metrics outlined and the assessment of the additional
influencing considerations above, the Board believes that the North America
Disposal is in the best interest of the Company and its Shareholders.
4. Use of Proceeds
Following Completion, the Group expects to receive approximately $18.0 million
of cash net of transaction-related fees in respect of the initial payment for
the North America Disposal.
As previously announced, the Board intends to make an initial distribution to
shareholders from available capital in Q4 2024, the amount of which will be
determined after providing for the ongoing costs and working capital
requirements of the residual runoff business and outstanding liabilities
(including historical tax liabilities). Further details of this return of
capital will be published by the Company in due course. For further
information on the Company's plans following Completion, see section 7.
"Description of the Group following Completion".
5. Summary of the Main Transaction Documents
The Company entered into a conditional asset purchase agreement with the Buyer
on 18 October 2024.
Pursuant to the APA, the Company is proposing to sell to the Buyer the assets
that form the North America Business. The value payable for the North America
Disposal is up to $30.0 million to be satisfied by the payment of $20.0
million in cash on Completion and a further payment of up to $10.0 million
based on actual revenue and gross profit performance of the North America
Business for the financial year ending 31 December 2024 against target for the
same period.
The principal terms of the APA are as follows:
The Company together with XLMedia Publishing Limited, XLMedia US Inc. XLMedia
Canada Marketing Ltd and Webpals Inc. (together the Sellers) will sell the
North America Business free from legal encumbrances to the Buyer upon
fulfilment on certain conditions precedent.
Conditions: the conditions precedent include that commitments made in respect
of the following items remain in force at the date of completion (i) the
transfer of all senior employees and not less than 90% of all non-senior
employees; (ii) the transfer of certain media partner contracts, to the Buyer
on the completion date; and (iii) shareholder approval in respect of the
transaction having been given by the Company's shareholders in a shareholders'
meeting duly convened for such purpose. The Buyer may waive these conditions
(i) and (ii) at any time prior 15 December 2024 (the Long Stop Date) provided
that should any of the conditions not be fulfilled by the Long Stop Date,
either the Sellers or the Buyer shall have the right to terminate the APA.
Consideration: the consideration payable by the Buyer for the North America
Business will be up to $30.0 million comprising an initial amount of $20.0
million payable on the completion date and a variable component of up to $10.0
million. The variable component of the consideration will be subject to
adjustment and calculated by reference to the Group's revenue and gross profit
in the 2024 financial year. To achieve full payout, the North America Business
would need to exceed current market expectation.
Pre-Completion Obligations: the Sellers are subject to customary
pre-completion undertakings whereby they agree to operate the North America
Business in the ordinary course and agree to refrain from undertaking acts
which may negatively impact the value and integrity of the North America
Business, unless they have the prior written consent of the Buyer (not to be
unreasonably withheld, conditioned or delayed).
Asset Migration: for a period from Completion until 31 January 2025 the
Sellers shall use their best efforts (without being obliged to make payments
to counterparties under relevant contracts to incentivise or otherwise procure
or effect the novation or assignment or such contracts) to implement and carry
out such tasks reasonably required to complete the migration of the North
America Business to the Buyer.
Warranties and Limitations on Liability: the Sellers have provided the Buyer
with a set of business warranties in relation to the North America Business
and fundamental warranties (including unrestricted title to assets and
capacity to enter into and implement the APA). These warranties were given at
signing of the APA and will be repeated at completion of the sale. The Buyer
has purchased warranty and indemnity insurance cover in respect of the
warranties such that the Sellers' aggregate liability in respect of all
warranty claims under the APA will be limited to $1.00 except in respect of
any breach of warranty that occurs between the date the APA and the date of
completion (Gap Claims). The Buyer will have recourse to the Sellers in
respect of breaches of the fundamental warranties to the extent that it does
not have sufficient recourse under its warranty and indemnity insurance
policy. The Sellers' maximum aggregate liability in respect of Gap Claims
and breaches of fundamental warranties is limited to to the Consideration
actually received by the Sellers.
Governing Law: the APA is governed by English law and disputes arising out of
the APA shall be resolved by the London Court of International Arbitration.
6. Information on the Buyer
Sportradar AG is a wholly owned subsidiary of Sportradar Group AG (NASDAQ:
SRAD). Founded in 2001, Sportradar is a leading global sports technology
company creating immersive experiences for sports fans and bettors. Positioned
at the intersection of the sports, media and betting industries, the company
provides sports federations, news media, consumer platforms and sports betting
operators with a best-in-class range of solutions to help grow their business.
As the trusted partner of organisations like the ATP, NBA, NHL, MLB, NASCAR,
UEFA, FIFA and Bundesliga, Sportradar covers close to a million events
annually across all major sports.
7. Description of the Group Following Completion
Following Completion, XLMedia PLC (and its subsidiaries) will have sold its
primary trading activities accounting for some 95% of its remaining business
revenues. With effect from Completion, the Company will be classified under
AIM Rule 15 as a cash shell but, as it has no plans to seek to make an
acquisition or acquisitions which constitute a reverse takeover under AIM Rule
14, it will have six months from Completion before the Ordinary Shares will be
suspended from trading on AIM pursuant to AIM Rule 40. Shareholders should be
aware that admission to trading on AIM will be cancelled six months from the
date of suspension should the reason for the suspension not have been
rectified.
Whilst the Group will have no material trading, the Board believes that it is
in the best interests of the Shareholders for the Company to remain admitted
to trading on AIM while it seeks to make returns of the consideration to
Shareholders and settles relevant liabilities rather than cancelling the
admission of shares trading on AIM. The Board is considering a number of
options to facilitate the return of capital to Shareholders. Following
completion of the return(s) of capital, the Company expects to seek
Shareholder approval to cancel admission to AIM and to commence a summary
winding up of the Company pursuant to Chapter 2, Part 21 of the Jersey
Companies Law. Further detail on these steps will be provided to Shareholders
in due course.
Expected Timetable to Cancellation of Listing on AIM
2 October 2024 Payment received from GAMB of $10.0 million (six months post completion Europe
Disposal on 1 April 2024)
7 November 2024 General Meeting to approve North America Disposal
12 November 2024 Expected completion date (subject to satisfaction or waiver of all conditions)
12 November 2024 Payment of $20.0 million from Sportradar for initial payment pursuant to the
North America Disposal
2 April 2025 Payment from GAMB of $7.5 million and up to a further $5.0 million in earnout
pursuant to the Europe disposal
30 April 2025 Long stop date for payment of up to $10.0 million earn out consideration by
Sportradar pursuant to the North America Disposal
12 May 2025 Expected suspension of Ordinary Shares from trading on AIM
12 November 2025 Final date on which cancellation of admission to AIM under AIM Rules may occur
Following cancellation Proposed summary winding up of the Company
Residual Group
Post the North American Disposal, the Group will comprise the Company and
various directly and indirectly owned subsidiaries incorporated in various
jurisdictions. Following the North America Disposal, approximately 35 North
America staff will transfer to Sportradar.
The Group is obliged to provide limited transition support services to
Sportradar from completion for a period of up to three months.
The Company will remain subject to the AIM Rules during the period of post
transaction and during suspension. The Group will therefore retain staff to
support its residual obligations including:
transitional service arrangements, group reporting, filing and listing
requirements, commencing the orderly winding-up or strike off process for the
Group's subsidiaries, collecting cash from purchasers of the Group's assets,
and supporting the board in making subsequent distributions. Remaining staff
numbers will reduce to levels commensurate with the run off of the residual
business.
The Company will continue to meet AIM reporting requirements until it has
cancelled its admission to AIM.
8. The Board
In the immediate term, the current Board will remain to oversee the handover
of assets to Sportradar and oversee the Group's other activities explained in
paragraph 7. "Description of Group following completion". Further
announcements will follow.
9. Current Trading and Outlook
In the Results for the six months ended 30 June 2024, following the sale of
the Europe and Canada assets, continuing revenues from the North American
business for the period April to August have performed ahead of the prior
year.
The usual acceleration in new customer acquisition at the start of NFL season
in September has been slower than anticipated. However, further acquisition
budgets are expected to be released by some operators.
Accordingly, the Board remain of the view that Adjusted EBITDA for the
Continuing Business (North America Business and other revenues), excluding
revenue and costs of the Discontinued Business, remains broadly in line with
market expectations.
10. Irrevocable Undertakings
Each of the Directors who hold Ordinary Shares in the Company has provided an
irrevocable undertaking to instruct a vote in favour of the Resolution at the
General Meeting to approve the North America Disposal. These irrevocable
undertakings remain binding in all circumstances. Directors hold 8,388,966
Ordinary Shares representing approximately 3.19 per cent of the ordinary share
capital of the Company in issue as at the Last Practicable Date.
In addition to the irrevocable undertakings given by the Directors described
above, the Buyer has also received an irrevocable undertaking from Premier
Investissement SAS to instruct a vote (or procure votes) in favour of the
Resolution at the General Meeting in respect of 73,478,567 Ordinary Shares in
total, representing approximately 27.98 per cent of the ordinary share capital
of the Company in issue as at the Last Practicable Date.
The Buyer has therefore received irrevocable undertakings in respect of a
total of 81,867,533 Ordinary Shares representing, in aggregate, approximately
31.18 per cent of the Company's issued share capital in issue as at the Last
Practicable Date.
11. Taxation
Any person who is in any doubt as to his or her tax position or who is subject
to tax in a jurisdiction other than the United Kingdom, is strongly
recommended to consult with his or her professional tax adviser immediately.
12. AIM Rule 15 and General Meeting
In accordance with AIM Rule 15, the North America Disposal constitutes a
fundamental change of business of the Company and is therefore conditional on
Shareholder approval at a General Meeting being convened for 9.00 a.m. GMT on
7 November 2024. Accordingly, Shareholders are asked to vote at the General
Meeting in favour of the Resolution to approve the North America Disposal. On
Completion, the Company will have no material trading business, activities and
assets other than the cash proceeds from the Europe Disposal and North America
Disposal. While the Company will be treated as a "cash shell" for the purposes
of AIM Rule 15, it does not propose to make an acquisition constituting a
reverse takeover but will look to receive and return the proceeds from the
Europe Disposal and the North America Disposal to Shareholders while remaining
admitted to AIM.
A notice convening a General Meeting for 9.00 a.m. GMT on 7 November 2024 at
the offices of Cavendish Capital Markets at One Bartholomew Close, London EC1A
7BL, is set out at the end of the Circular.
The Resolution is an ordinary resolution that the North America Disposal be
approved. If it is not passed, Completion under the APA will not occur.
13. Importance of Shareholders' Vote
The Resolution must be passed by Shareholders at the General Meeting in order
for the Proposed Transaction to proceed. If Shareholders do not approve the
Resolution, the Proposed Transaction cannot be implemented, and in such
circumstances, the Board will continue to operate the business in the way it
has to date.
14. Recommendation
The Board considers the Proposed Transaction to be in the best interests of
the Company and its Shareholders as a whole.
Accordingly, the Board unanimously recommends that Shareholders vote in favour
of the Resolution, as those Directors who hold Ordinary Shares have
irrevocably undertaken to do in respect of their own beneficial Shareholdings.
Definitions
The following definitions apply throughout this announcement unless the
context requires otherwise:
"Adjusted EBITDA 2023" the operating profit for the financial year 2023 after adding back
depreciation, amortisation, impairment, share based payments, exceptional
minimum guarantee costs, restructuring costs and aborted deal related costs
"AIM" AIM, a market operated by the London Stock Exchange
"AIM Rules" the AIM Rules for Companies published by the London Stock Exchange from time
to time
"APA" the conditional asset purchase agreement dated 18 October 2024 for the
disposal of the North America Business to the Buyer
"Board" or "Directors" the directors of the Company
"Business Day" any day on which banks are usually open in England, Wales and Jersey for the
transaction of sterling business, other than a Saturday, Sunday or public
holiday
"Buyer" Sportradar AG, a company incorporated in Switzerland with file number
CHE-113.910.142 whose registered office is at Feldlistrasse 2, CH-9000, St.
Gallen, Switzerland ("Sportradar")
"Cavendish" or "Broker" Cavendish Capital Markets Limited, nominated adviser and broker to the Company
"certificated" or "in certificated form" a share or other security not held in uncertificated form (that is, not in
CREST)
"Company" XLMedia PLC, incorporated in Jersey with registered number 114467
"Completion" completion of the APA in accordance with its terms
"Completion Date" the date of Completion
"Conditions" the conditions to Completion as set out in the APA as summarised at paragraph
5
"Consideration" the amount of up to $30.0 million in cash
"CREST" a relevant system (as defined in the CREST Regulations) in respect of which
Euroclear is the Operator (as defined in the CREST Regulations)
"CREST Regulations" the Uncertified Securities Regulations 2001 (SI 2001/3755) as amended from
time to time
"Earn Out" $10.0 million of the total Consideration that is payable in whole or in part
subject to the North America Business achieving all or some part of an agreed
2024 revenue target and gross profit target as set out in paragraph 5
"Euroclear" Euroclear UK & International Limited, the operator of CREST
"Europe Business" the Europe and Canada sports betting and gaming asset of the Company
"Europe Disposal" the disposal of the Europe Business to Gambling.com Group Limited ("GAMB")
"Financial Conduct Authority" or "FCA" the Financial Conduct Authority in its capacity as the competent authority for
the purposes of Part VI of FSMA
"Form of Proxy" the form of proxy for use by Shareholders in connection with the General
Meeting
"FSMA" the Financial Services and Markets Act 2000 (as amended)
"General Meeting" the general meeting of the Company to be held at 9.00 a.m. GMT on 7 November
2024 (or any reconvened meeting following any adjournment of the general
meeting) at the offices of Cavendish at One Bartholomew Close, London EC1A
7BL, notice of which is set out at the end of this document
"Group" or "Group Company" the Company and/or any or all of its existing subsidiaries and subsidiary
undertakings
"Jersey Companies Law" the Companies (Jersey) Law 1991, as amended
"Last Practicable Date" 18 October 2024
"Link Group" or "Link" a trading name of Link Market Services Limited
"London Stock Exchange" London Stock Exchange plc
"Market Abuse Regulation" the Market Abuse Regulation (2014/596/EU) (incorporating the technical
standards, delegated regulations and guidance notes, published by the European
Commission, London Stock Exchange, the FCA and the European Securities and
Markets Authority) as retained in the UK pursuant to section 3 of the European
Union (Withdrawal) Act 2018
"Media Partner Business" the provision of high-quality specialist sports betting and gaming commercial
content for inclusion in the websites of media organisations with broader
generalist reach in the relevant markets with an agreement to share revenues
generated from such content
"North America Business" those assets including domain names, contracts, software licences, trademarks
and certain employees that make up the Company's business in North America
"North America Disposal" the disposal of the North America Business
"Notice" or "Notice of General Meeting" the notice of the General Meeting set out at the end of this document
"Ordinary Shares" means ordinary shares of US$0.000001 each in the capital of the Company
"Owned and Operated" websites owned directly by the Group that provide analysis, opinion,
information and unique insights to engage with sports fans and where
appropriate, introduce them to opening a new 'book' or to place a bet with an
operator
"Proposals" the Proposed Transaction and the subsequent plans as set out in this document
"Proposed Transaction" the proposed North America Disposal
"Registrar" Link Group, registrars to the Company
"Regulatory Information Service" one of the regulatory information services authorised by the FCA acting in its
capacity as the UK listing authority to receive, process and disseminate
regulatory information
"Resolution" the resolution to be proposed at the General Meeting, as set out in the Notice
of General Meeting
"Sellers" the Company, XLMedia Publishing Limited, XLMedia US Inc., XLMedia Canada
Marketing Ltd and Webpals Inc.
"Shareholders" holders of Ordinary Shares
"uncertificated" or "in uncertificated form" recorded on the register of members of the Company as being held in
uncertificated form in CREST and title to which, by virtue of the CREST
Regulations, may be transferred by means of CREST
"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland
"USA" or "US" the United States of America
"£", "pounds sterling", "penny" or "pence" UK pounds sterling, the lawful currency of the United Kingdom
"$" or "dollars" USA dollars, the lawful currency of the USA
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