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ITE Group PLC (ITE)

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Tuesday 15 May, 2018

ITE Group PLC

Proposed Acquisition & Rights Issue

RNS Number : 0442O
ITE Group PLC
15 May 2018
 

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

 

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, ANY OFFER, INVITATION OR RECOMMENDATION TO PURCHASE, SELL OR SUBSCRIBE FOR ANY SECURITIES IN ANY JURISDICTION AND NEITHER THE ISSUE OF THE INFORMATION NOR ANYTHING CONTAINED IN THIS ANNOUNCEMENT SHALL FORM THE BASIS OF OR BE RELIED ON IN CONNECTION WITH, OR ACT AS AN INDUCEMENT TO ENTER INTO, ANY INVESTMENT ACTIVITY. ANY DECISIONS TO PURCHASE, SUBSCRIBE FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY SECURITIES MUST BE MADE ONLY ON THE BASIS OF THE INFORMATION CONTAINED IN AND INCORPORATED BY REFERENCE INTO THE COMBINED CIRCULAR AND PROSPECTUS ONCE PUBLISHED.

 

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

 

ITE Group plc

 

Proposed £300 million acquisition of the Ascential Exhibitions Business

and fully underwritten rights issue

 

Summary

 

·      ITE Group plc today announces that it has entered into a conditional agreement to acquire Ascential Events Limited from Ascential plc, based on an enterprise value of £300 million (calculated on a cash-free debt-free basis and subject to normalised working capital).

 

·      The Ascential Exhibitions Business, which organises market-leading exhibitions that bring business communities together to connect and trade, includes two global industry-leading exhibitions brands, Bett and CWIEME, and a number of market-leading UK exhibitions brands such as the Spring and Autumn Fairs and Pure. In the financial year ended 31 December 2017, these brands generated revenues of £77.5 million and EBITDA of £24.0 million[1].

 

·      The Directors believe that the Ascential Exhibitions Business is an attractive, high-quality portfolio of 'must-attend' exhibitions. The Acquisition aligns with ITE's continuing TAG Programme and specifically its strategy of making product-led acquisitions of scalable events brands which are seen as offering strong growth potential under ITE's ownership.

 

·      The Acquisition will diversify ITE's exposure to some end-market verticals such as education technology and coil winding, electric motor and transformer manufacturing technologies that the Directors believe are attractive and supported by structural growth drivers, creating a more balanced portfolio of events in the Enlarged Group.

 

·      The Acquisition will also diversify ITE's geographic footprint, giving rise to further opportunities for growth. In particular, the Directors believe that following the Acquisition, Bett and CWIEME will benefit from the leveraging of ITE's wider geographic footprint and existing infrastructure, providing geo-cloning opportunities.

 

·      Attractive financial effects of the Acquisition:

 

Expected to be earnings enhancing in the first full year following Completion (FY2019)

The Directors expect to be able to maintain ITE's existing dividend policy following Completion

Net debt / pro-forma 2017A EBITDA within target range of 1.5x - 2x[2]

·      The Directors estimate that, following Completion, the Enlarged Group will be able to achieve annualised pre-tax gross cost synergies of £4 million - £5 million by implementing an integration plan that seeks to eliminate cost duplication, generate cost savings from economies of scale and drive operational efficiencies in the Ascential Exhibitions Business.

 

·      The Directors intend to re-invest £2 million - £2.5 million from FY2019, designed to drive additional revenue growth from FY2020 in part to realise a number of incremental revenue opportunities that are expected to arise as a result of the Acquisition. These include building the existing geo-clones to scale, additional geo-cloning of events into markets where ITE already has a local platform and where relevant, the cross-selling of events. In addition, further focus and investment will be made into visitor marketing to improve retention and customer ROI.

 

·      The Acquisition and related expenses are expected to be funded by the proceeds of a fully underwritten rights issue by ITE, which will raise up to approximately £315 million (before expenses). With respect to this rights issue, the Company has entered into a standby underwriting agreement with Investec Bank plc pending launch of the rights issue and publication of the combined circular and prospectus. Numis Securities Limited is expected to underwrite the Rights Issue with Investec Bank plc in due course.

 

·      The Company also intends to raise approximately £50 million through amending its existing debt facilities, which would allow it to reduce the Rights Issue to approximately £265 million (before expenses).

 

·      The Acquisition is a Class 1 transaction for ITE under the Listing Rules and is therefore conditional, inter alia, upon the approval by Shareholders. The Directors intend to unanimously recommend that ITE shareholders vote in favour of the resolutions to approve the Acquisition and to authorise ITE to proceed with the Rights Issue.

 

·      The Directors intend to take up their entitlements under the Rights Issue in full.

 

·      ITE expects to publish a combined circular and prospectus in connection with the Acquisition and the Rights Issue, including the notice of General Meeting in early June 2018. Subject to the satisfaction of the conditions to the Acquisition, Completion is expected to occur in July 2018.

 

Commenting on the Acquisition, Mark Shashoua, Chief Executive Officer of ITE, said:

 

"Today, we have announced an agreement to acquire a highly complementary portfolio of exhibitions from Ascential. Each show is market-leading and two are truly global. This acquisition accelerates our strategy of becoming product-led and building a portfolio of content-driven, must-attend events regardless of geography.

 

A number of our senior management team, including myself, know these assets extremely well and see a clear opportunity to drive cost synergies, and provide the investment, operational rigour and international platform required to drive growth. We expect the acquisition to be earnings enhancing during FY2019, our first full financial year of ownership, and our Board unanimously considers the acquisition and the rights issue to be in the best interests of ITE and its shareholders."

 

This summary should be read in conjunction with the full text of this announcement. Terms defined in this summary have the same meaning when used in the full text of this announcement.

 

Enquiries:

 

ITE

+44 (0) 20 7596 5017

Mark Shashoua, Chief Executive Officer

 

Andrew Beach, Chief Financial Officer

 

Melissa McVeigh, Director of Communications

 

 

 

Investec

+44 (0) 20 7597 5970

(Sponsor, Financial Adviser, Joint Broker, Joint Bookrunner and Lead Underwriter)

Corporate Finance: Andrew Pinder, Junya Iwamoto, David Anderson

 

Corporate Broking: Sara Hale, Chris Sim, Neil Coleman

 

 

 

Numis

+44 (0) 20 7260 1000

(Joint Broker, Joint Bookrunner and Joint Underwriter)

Nick Westlake

 

Christopher Wilkinson

 

Toby Adcock

 

Hugo Rubinstein

 

 

 

FTI Consulting

+44 (0) 20 3727 1000

(Financial PR)

Charles Palmer

 

Emma Hall

 

 

 

1.       Introduction

 

The Company today announces that it has entered into a conditional agreement to acquire the entire issued and to be issued share capital of Ascential Events Limited, which owns and operates the Ascential Exhibitions Business, based on an enterprise value of £300 million. In addition, the Company announces that it has entered into the Standby Underwriting Letter under which Investec has conditionally agreed to underwrite a rights issue by the Company to raise approximately £315 million (before expenses). Numis is also expected to underwrite the Rights Issue with Investec in due course.

 

The Target is the holding company of the Ascential Exhibitions Business, which organises market-leading exhibitions that bring business communities together to connect and trade. The Ascential Exhibitions Business includes two global industry-leading exhibitions brands, Bett and CWIEME, and a number of market-leading UK exhibitions brands such as the Spring and Autumn Fairs and Pure.

 

The Directors believe the Ascential Exhibitions Business is an attractive, high-quality portfolio of 'must-attend' exhibitions. The acquisition of the Ascential Exhibitions Business aligns with ITE's TAG Programme and specifically its strategy of making product-led acquisitions of scalable events brands which the Directors believe offer strong growth potential under ITE's ownership. The Acquisition will diversify ITE's exposure to end-market verticals, creating a more balanced portfolio of events in the Enlarged Group, by adding market-leading events in a number of industry verticals including: education technology; coil winding, electric motor and transformer manufacturing technologies; home and gift; fashion and retail; broadcast and video; and gardening and outdoor living. The Acquisition will also diversify ITE's geographic footprint, giving rise to further opportunities for growth. In particular, the Directors believe that following the Acquisition, Bett and CWIEME will benefit from leveraging ITE's wider geographic footprint and existing infrastructure, providing geo-cloning opportunities.

 

The Acquisition, because of its size in relation to the Company, is a Class 1 transaction for ITE under the Listing Rules and is therefore conditional, inter alia, upon the approval by Shareholders.

 

The Company also announces today that it is in discussions with a view to increasing the size of its existing banking facilities such that it would be able to draw down £50 million from its debt facility to part fund the Acquisition, which would reduce the required size of the Rights Issue to £265 million. These arrangements are expected to be concluded by the time the Combined Circular and Prospectus is published and Rights Issue is formally launched.

 

The Board unanimously considers the Acquisition and the Rights Issue to be in the best interests of ITE and its Shareholders as a whole.

 

2.       Background to and strategic rationale for the Acquisition

 

The ITE Group is a leading organiser of international trade exhibitions and conferences, specialising in organising 'must-attend' events that help to connect attendees to their target audiences around the world, making them the premier events in which to participate. Exhibitors use the ITE Group's exhibitions and conferences as sales and marketing events, where they interact with visitors, promote new and existing products, generate leads and ultimately make sales, with the events acting as an industry platform bringing a business community together under one roof.

 

The ITE Group serves its communities of exhibitors, sponsors and delegates by helping them connect with and learn from their contemporaries and industry experts, and by creating and providing access to content that helps people and businesses make more informed decisions. The ITE Group organises over 200 exhibitions and conferences each year, many of which are market-leading events and well-known brands in key industry sectors, and is structured into five operating divisions based on: geographic location, being Asia, Central Asia, Eastern & Southern Europe, and Russia; and a brands division ("Brands"), a portfolio of international events brands.

 

In 2017, the ITE Group embarked upon a targeted and clear strategy: the TAG Programme. As reported in its results for the year ended 30 September 2017, good progress has been made on the TAG Programme, with operational and financial momentum leading to improved trading trends across the business. This operational and financial progress has continued through the first half of the 2018 financial year, as reported in its results for the six months ended 31 March 2018 announced earlier today.

 

2.1     ITE's strategy - the TAG Programme

 

At the start of 2017, the ITE Group undertook a thorough and detailed review of its business, which included reviews by product, geography, structures, systems, sales, marketing, IT and finance. The outputs of this review, unveiled in May 2017, resulted in an evolved strategy and the introduction of the three year TAG Programme.

 

At the Group's strategy update in May 2017, a new vision was announced: "To create the world's leading portfolio of content-driven, must-attend events delivering an outstanding experience and ROI for our customers".

 

The Group's aim is to organise and run market-leading events by focusing on the needs of exhibitors and visitors and having a product-led strategy. To deliver this aim, the TAG Programme is being implemented across the Group and comprises three pillars:

 

a)       create a scalable platform to generate real organic growth;

b)       actively manage ITE's portfolio; and

c)       make selective product-led acquisitions.

 

a)       Create a scalable platform to generate real organic growth

 

The Group is moving to a centralised and product-led model because the evolution of customer expectations means that local markets now expect events to be of a standard, international quality. Furthermore, global multinationals are starting to choose a single events company to exhibit with, that caters for them globally as a one-stop shop that is able to deliver a consistently high standard of service everywhere.

 

TAG Programme investments related to creating a scalable platform are spread across five areas: to create best practice functions and teams; invest in show operations; build capability and talent; drive a performance culture; and build and maintain fit for purpose IT infrastructure and systems.

 

b)       Actively manage ITE's portfolio

 

The Group has segmented its business into "Core" and "Non-Core" events to enable ITE management to increase its focus on events that are considered to present the greatest opportunities, whilst reducing distraction from others.

 

The Core events are those that the Directors believe are of strategic importance to the Group's future, including the Group's largest events and those with the greatest potential for growth. The Non-Core events consist of smaller shows which the Directors believe have less potential for growth.

 

As part of the Group's strategy, a top priority remains to apply TAG Programme investments to its Core events, to realise their full potential. This strategy includes investing in content to drive greater customer experience for exhibitors and visitors, and improved customer retention.

 

The Group's international sales teams have focused on ITE's Core events and this has contributed to strong revenue growth from Core events as evidenced by combined double digit like-for-like revenue growth delivered from four of its top 10 events (by revenue) which occurred during the six months ended 31 March 2018.

 

During the year ended 30 September 2017, the Group discontinued 37 Non-Core events, with a further 22 discontinued in the six months ended 31 March 2018. On 24 April 2018, the Group also announced the disposal of TradeLink ITE Sdn. Bhd., owner of the Metaltech exhibition in Malaysia for £4.2 million, as a continuation of this pillar of the TAG Programme.

 

In line with its product-led strategy, the Group plans to continue to proactively review its portfolio on an ongoing basis.

 

c)       Selective product-led acquisitions

 

The Group's strategy includes making selective product-led, not geography-led, acquisitions that will be assessed on the following criteria:

·      Scalability - in sectors with high growth potential

·      A distinct customer value proposition - serving a clear part of an industry sector

·      Position in attractive markets for events serving a high growth underlying market

·      Evidence of strong organic revenue growth and profit margins

·      Potential to roll out internationally - dependent on the product

·      Earnings accretive - offering a good return on invested capital

 

The Directors believe the Acquisition fulfils these criteria.

 

2.2     The Acquisition and key benefits

 

The Directors believe that the strategic rationale for the Acquisition is compelling and in strong alignment with the TAG Programme.

 

The key rationales for, and benefits of, the Acquisition include:

 

The Ascential Exhibitions Business is a high-quality, product-led portfolio with global brands

 

The Ascential Exhibitions Business includes two global industry-leading events brands, Bett and CWIEME, and a number of market-leading UK events brands such as the Spring and Autumn Fairs and Pure.

 

Bett is the leading education technology series of global events and leadership summits. CWIEME is the leading global event for coil winding, electric motor and transformer manufacturing technologies. Spring and Autumn Fairs are the UK's leading home and gift shows for the retail industry. Pure is London's leading fashion trade show.

 

Bett and CWIEME are industry-leading global brands serving markets which the Directors believe are attractive end markets supported by structural growth drivers. Under ITE's ownership, they are expected to benefit from exploiting ITE's diversified geographic footprint and international infrastructure, better addressing existing customer demand which is currently unfulfilled.

 

Spring and Autumn Fairs, Pure and the other UK events brands being acquired are market leading, profitable and cash generative. Under ITE's ownership, the Directors believe the events will benefit from dedicated management focus.

 

Strong growth potential of the Ascential Exhibitions Business under ITE's management

 

The ITE CEO, Mark Shashoua, and COO, John Gulliver, will lead the integration and growth of the Enlarged Group after Completion. The ITE management team has a strong track record in the exhibitions and events market, Mark and John having previously held the positions of CEO and CFO of the Ascential Exhibitions Business respectively until early 2016.

 

The Directors believe the Ascential Exhibitions Business would have strong growth potential under ITE's ownership because: (i) of Mark and John's previous positions as CEO and CFO (respectively) until early 2016 providing them good insight into how to drive growth across the acquired events portfolio; (ii) given the scale of the Ascential Exhibitions Business brands, they will all form part of, and be managed as, Core events within ITE, receiving dedicated management focus and attention; and (iii) the ITE management team's experience of, knowledge of and focus on the events industry.

 

In particular, for Spring and Autumn Fairs, Pure and the other UK events brands being acquired, ITE intends to refresh these events through focussing on delivering greater exhibitor return on investment, re-design of the event space and restructuring of the sales strategy.

 

The Directors believe that the ITE management team can create value and returns in the Enlarged Group by improving the customer experience, which is expected to result in exhibitor, attendance and yield growth.

 

The Directors believe that the Enlarged Group will be able to accrue considerable additional benefits from the sharing of best practice between ITE and the Ascential Exhibitions Business. Management intends to implement its best practices in the Enlarged Group as it believes there are opportunities to grow both its immature and mature events, if best practices are shared.

 

 

Operating synergies

 

ITE intends to implement an integration plan that seeks to eliminate cost duplication, generate cost savings from economies of scale and drive operational efficiencies in the Ascential Exhibitions Business.

 

In addition, ITE has identified a number of incremental revenue opportunities that are expected to arise as a result of the Acquisition, including cross-selling of sponsorship opportunities across the ITE events portfolio, customer cross-marketing of events, and geo-cloning of exhibition brands.

 

Delivering an enlarged ITE with a more diverse portfolio

 

As part of the TAG Programme, ITE has been focused on migrating from being a geographically structured business with strengths in emerging markets, to one that is product-led, with strong regional platforms. The Acquisition will diversify ITE's business across geographic, currency and end-market vertical exposures.

 

As a result of the Acquisition, ITE's portfolio will be significantly strengthened through the integration of the Ascential Exhibitions Business, by adding market-leading events in a number of industry verticals including: education technology; coil winding, electric motor and transformer manufacturing technologies; home and gift; fashion and retail; broadcast and video; and gardening and outdoor living.

 

The Ascential Exhibitions Business' portfolio of seven events brands, combined with ITE's over 200 events will position ITE as one of the largest owner/operators in the business-to-business face-to-face media segment. Within this, it will become one of the largest operators of exhibitions globally, according to data from AMR International. The Directors believe that the global market for exhibitions and events remains a highly attractive growth market, with AMR International estimating that the industry was worth $26.1 billion in 2017, with forecast growth at an annualised rate of 4.2 per cent. between 2016 and 2021, subject to regional variations.

 

Offers attractive financial returns

 

When making the decision to pursue the Acquisition, the ITE Directors considered a number of factors, which included the Ascential Exhibitions Business' profitability margins, availability of realisable operating synergies, and the revenue growth opportunities realisable by ITE under its ownership.

 

The Acquisition will also reduce ITE's exposure to Russia-based revenue, with the proportion of revenue from Russia reducing on a pro-forma basis[3] from approximately 47 per cent. to 31 per cent.

 

The Directors believe the Acquisition will be earnings enhancing in the first full financial year (ending 30 September 2019) following Completion.

 

3.       Summary information on ITE Group

 

ITE Group was established in 1991 when it first held a series of trade exhibitions in Russia in key sectors of the economy, and through growth, acquisition and different phases of development, has become a leading organiser of international trade exhibitions and conferences.

 

The ITE Group specialises in organising events that help to connect attendees to their target audiences around the world. Exhibitors use the ITE Group's exhibitions and conferences as sales and marketing events, where they interact with visitors, promote new and existing products, generate leads and ultimately make sales, with the events acting as an industry platform bringing a business community together under one roof.

 

The ITE Group serves its communities of exhibitors, sponsors and delegates by helping them connect with and learn from their contemporaries and industry experts, and by creating and providing access to content that helps people and businesses make more informed decisions. The ITE Group organises over 200 exhibitions and conferences each year, many of which are market-leading events and well-known brands in key industry sectors, and is structured into five operating divisions based on: geographic location, being Asia, Central Asia, Eastern & Southern Europe, and Russia; and Brands, a portfolio of international events brands.

 

ITE is currently the ninth largest conference and exhibition organiser by revenue, and has strong market positions in a number of emerging markets.

 

In FY2017, the ITE Group generated total revenues of £152.6 million and headline profit before tax of £31.6 million.

 

With its headquarters in London, the ITE Group employs 1,383 people across its 30 offices globally.

 

4.       Summary information on the Ascential Exhibitions Business

 

The Ascential Exhibitions Business organises market-leading exhibitions that bring business communities together to connect and trade, with the events brands being Bett (including and The Education Show), CWIEME, the Spring and Autumn Fairs, Pure, Glee and BVE.

 

The Ascential Exhibitions Business operates within Ascential's Exhibitions and Festivals division, which includes additional brands such as Cannes Lions and Money20/20 that are not being acquired as part of the Acquisition.

 

Bett is the leading educational technology series of global events and leadership summits. CWIEME is the leading global event for coil winding, electric motor and transformer manufacturing technologies. The Spring and Autumn Fairs are two of the UK's leading home and gift shows for the retail industry. Pure is London's leading fashion trade show.

 

In FY2017, the Ascential Exhibitions Business generated total revenues of £77.5 million and Adjusted EBITDA of £24.0 million[4] after removing results of events not being acquired, discontinued event revenue and profit, and on a constant currency basis.

 

With its headquarters in London, the Ascential Exhibitions Business employs 197 people across its four offices globally.

 

In FY2017, Ascential Events Limited, the holding company of the Ascential Exhibitions Business, generated Adjusted EBITDA of £23.1 million and had gross assets of approximately £58 million as at 31 December 2017.

 

5.       Financial effects of the Acquisition

 

Cost savings and integration

 

The Directors estimate that, following Completion, the Enlarged Group will be able to achieve annualised pre-tax gross cost synergies of £4 million - £5 million by implementing an integration plan that seeks to eliminate cost duplication, generate cost savings from economies of scale and drive operational efficiencies in the Ascential Exhibitions Business.

 

The Directors intend to re-invest £2 million - £2.5 million from 2019, designed to drive additional revenue growth from FY2020 in part to realise a number of incremental revenue opportunities that are expected to arise as a result of the Acquisition. These include building the existing geo-clones to scale, additional geo-cloning of events into markets where ITE already has a local platform and where relevant, the cross-selling of events. In addition, further focus and investment will be made into visitor marketing to improve retention and customer ROI.

 

ITE has, together with its advisers, conducted due diligence on the Ascential Exhibitions Business, including having discussions with senior management, all of which has supplemented ITE's existing knowledge of the Ascential Exhibitions Business. This diligence process coupled with ITE's prior knowledge of the Ascential Exhibitions Business has enabled the ITE executive team to prepare their integration plan.

 

Leverage

 

The Company intends to raise approximately £50 million through amending its existing debt facility at the same pricing as ITE's existing debt facility, which would allow it to reduce the Rights Issue to approximately £265 million.

 

Following Completion, and assuming the Rights Issue had completed and the amended bank facilities were fully drawn, the pro forma leverage as at 30 September 2017 for the Enlarged Group would have been within ITE's stated target range of 1.5x to 2x EBITDA[5]. The ITE Directors are expecting to be able to deleverage the business further during the year ending 30 September 2019.

 

6.       ITE current trading and prospects

 

ITE has today published its interim results for the six months ended 31 March 2018.

 

Mark Shashoua, Chief Executive Officer, made the following comments in relation to the Company's current trading and prospects:

 

"The TAG programme is delivering early benefits with improved financial performance from our Core events delivering like-for-like volume, revenue and headline PBT growth for the first time in four years.

 

Cash conversion remains strong and the Group enters the second half with high visibility of revenues having contracted £144m of revenue for the current financial year as at 11 May 2018, representing circa 89% of market expectations for the full year. As a result of our focus on forward bookings, the Group has also already contracted £31m of forward bookings for FY2019, representing 19% of consensus revenue. This is up 31% on a like-for-like basis and the improved level of bookings partly reflects the Group's focused sales initiatives on Core events, in line with its strategy.

 

The like-for-like growth and cash conversion have allowed management to invest £1.5m more in future period events than at this stage last year.

 

The combination of good progress on TAG and the proposed acquisition of Ascential Events Limited - a portfolio of market leading products that the management of ITE have known for a long time and that fit well with our strategy means that ITE is taking significant steps towards realising its vision of creating the world's leading portfolio of content-driven, must-attend events that deliver an outstanding experience and ROI for our customers."

 

ITE continues to perform in line with the Board's expectations and the Board is confident of the financial and trading prospects of the Company for the current financial year.

 

7.       Principal terms of the Acquisition

 

Under the terms of the Sale and Purchase Agreement, which is dated today, ITE Enterprises Limited (a subsidiary of the Company) has agreed to acquire the entire issued and to be issued share capital of the Target, the holding company for the Ascential Exhibitions Business based on an enterprise value (calculated on a cash-free debt-free basis and subject to normalised working capital) of £300 million. The consideration, which is payable in cash, will be adjusted, as required, following completion of Acquisition based on a completion accounts mechanism. The Acquisition is a Class 1 transaction for each of ITE and Ascential under Listing Rule 10.

 

The Acquisition is conditional, inter alia, upon obtaining the approval of Shareholders and of Ascential's shareholders, the Standby Underwriting Letter or the underwriting agreement to be entered into in connection with the Rights Issue (and replacing the Standby Underwriting Letter), as the case may be, having become unconditional and not having been terminated, the Combined Circular and Prospectus being published and the new ordinary Shares to be issued under the Rights Issue being admitted to listing on the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. The Sale and Purchase Agreement is terminable in certain circumstances, including in the event that the conditions are not satisfied by 13 June 2018, the Combined Circular and Prospectus has not been published by 13 June 2018, Ascential has not published its circular to its shareholders under Listing Rule 10 by 31 July 2018, the Standby Underwriting Letter or subsequent underwriting agreement is terminated, there is a material breach of the warranties given by the seller under the Sale and Purchase Agreement or there is material adverse change affecting the Ascential Exhibitions Business.

 

Under the Sale and Purchase Agreement, both the seller and the buyer have agree to pay a break fee to the other in certain circumstances, including in the event that the required shareholder approvals are not obtained or, in the case of ITE, the Standby Underwriting Agreement or subsequent underwriting agreement are terminated or fails to become unconditional. The obligations of ITE Enterprises Limited under the Sale and Purchase Agreement are guaranteed by the Company.

 

 

 

8.       Principal terms of the Rights Issue

 

With respect to the Rights Issue, ITE has entered into the Standby Underwriting Letter. The Standby Underwriting Letter envisages a nominal value underwriting under which the number of new ordinary shares in the capital of ITE to be issued will be set by reference to an issue price to be agreed by ITE and Investec prior to publication of the Combined Circular and Prospectus. If the parties cannot agree, the appropriate number of shares will be issued at nominal value in order to achieve the desired fundraising amount. The Standby Underwriting Letter contains customary representations and warranties, undertakings, conditions and termination rights.

 

It is intended that prior to the Combined Circular and Prospectus being published, ITE will enter into an underwriting agreement with the Underwriters under which the Underwriters will underwrite the Rights Issue which is expected to raise approximately £265 million (on the basis that the Company's existing debt facilities are increased to allow £50m to be drawn down under the Group's debt facilities to part fund the Acquisition). If entered into, that underwriting agreement would replace the Standby Underwriting Letter.

 

The Rights Issue will not be conditional on completion of the Acquisition. If the Rights Issue were to proceed but the Acquisition does not complete the Directors' current intention is that the proceeds of the Rights Issue will be applied to reducing the Company's net indebtedness on a short-term basis while the Directors evaluate alternative uses of the funds. If no such uses can be found, the Directors will consider how best to return all or part of the proceeds to Shareholders. Such a return could carry fiscal costs for certain Shareholders, will have costs for ITE and would be subject to applicable securities laws.

 

9.       Dividends

 

For FY2017, ITE paid a dividend of 4.0 pence per share (2016: 4.5 pence per share). For the six month period ended 31 March 2018, ITE has declared an interim dividend of 1.5 pence per share (2017: 1.5 pence per share).

 

The Directors understand the importance of dividend payments to Shareholders and intend to maintain ITE's existing policy of declaring dividends at a coverage ratio of more than 2x headline earnings per share, subject to the Company having sufficient distributable reserves and cash available for this purpose.

 

10.     Expected timetable to Completion

 

The Combined Circular and Prospectus containing further details on the Acquisition and Rights Issue, the Directors' recommendation, the terms of the Rights Issue, the notice of General Meeting and the Resolutions is expected to be published in early June 2018. Subject to satisfaction of the conditions to the Acquisition, Completion is expected to occur in July 2018.

 

 

Appendix I

 

Definitions

 

The definitions set out below apply throughout this announcement, including the summary, unless the context requires otherwise:

"Acquisition"

the proposed acquisition of the entire issued share capital of the Target by the Company

"Adjusted EBITDA"

earnings before interest, tax, depreciation, amortisation of intangible assets acquired through business combinations, share based payments, and exceptional items;

"Ascential"

Ascential plc, a company incorporated in England and Wales with registered number 9934451, whose registered office is at The Prow, 1 Wilder Walk, London W1B 5AP

"Ascential Exhibitions Business"

Ascential's business of organising organises exhibitions, congresses and festivals, of which the Target is the holding company

"Board"

the board of directors of the Company

"Combined Circular and Prospectus"

this combined class 1 circular and prospectus relating to the Rights Issue and Acquisition to be prepared according to the Listing Rules and Prospectus Rules and published by the Company

"Companies Act"

the Companies Act 2006, as amended from time to time

"Completion"

completion of the Acquisition;

"Directors"

the directors of the Company at the date of this announcement, and "Director" means any one of them

"Enlarged Group"

the ITE Group as enlarged by the Rights Issue proceeds and the Acquisition (following completion of the Rights Issue and Completion, as applicable)

"FCA" or "Financial Conduct Authority"

the Financial Conduct Authority of the United Kingdom and, where applicable, includes any successor body or bodies carrying out the functions currently carried out by the Financial Conduct Authority

"FCA Handbook"

the handbook of rules and guidance made by the FCA under FSMA

"FSMA"

the Financial Services and Markets Act 2000, as amended

"Investec"

Investec Bank plc

''ITE'' or the ''Company''

ITE Group plc, a public limited company incorporated in England and Wales with registered number 1927339, whose registered office is at 105 Salusbury Road, London NW6 6RG

''ITE Group'' or the ''Group''

the Company, together with its subsidiaries and subsidiary undertakings from time to time

"ITE Group's website"

www.ite-exhibitions.com

"Listing Rules"

the listing rules made under Part VI of FSMA (as set out in the FCA Handbook), as amended from time to time

"Market Abuse Regulation"

the Market Abuse Regulation (EU) (596/2014)

"Numis"

Numis Securities Limited

"Ordinary Shares"

ordinary shares of 1 pence each in the capital of the Company

"Pounds" or "Pounds Sterling" or "£" or "GBP" or "pence" or "p"

the lawful currency of the United Kingdom

"Prospectus Rules"

the prospectus rules made under Part VI of FSMA (as set out in the FCA Handbook), as amended

"Regulatory Information Service"

one of the regulatory information services authorised by the FCA to receive, process and disseminate regulatory information from listed companies

"Resolutions"

the resolutions to approve the Acquisition and Rights Issue to be set out in the notice of general meeting to be included in the Combined Circular and Prospectus and Resolution shall be construed accordingly

"Rights Issue"

the issue by way of rights of new Ordinary Shares on the terms and conditions to be set out in the Combined Circular and Prospectus and, for shareholder who hold their shares in certificated form, the accompanying provisional allotment letters

"RoI"

return on investment

"Sale and Purchase Agreement"

the sale and purchase agreement dated 15 May 2018 in respect of the entire issued share capital of the Target between Ascential UK Holdings Limited, ITE Enterprises Limited, Ascential Group Limited and the Company

"Shareholder(s)"

shareholders whose Ordinary Shares are registered on the Company's register of members

"Standby Underwriting Letter"

the standby underwriting letter dated 15 May 2018 between the Company and Investec

"subsidiary"

has the meaning given in section 1159 of the Companies Act

"subsidiary undertaking"

has the meaning given in section 1162 of the Companies Act

"TAG Programme"

ITE's continuing strategic Transformation & Growth Programme comprised of three pillars (1) creating a scalable platform; (2) managing the portfolio and (3) product-led acquisitions; underpinned by a performance-led culture.

"Target"

Ascential Events Limited, a company incorporated in England and Wales with registered number 7925964, whose registered office is at c/o Ascential Group Limited, The Prow, 1 Wilder Walk, London W1B 5AP

"Underwriters"

Investec and Numis

"United Kingdom" or "UK"

the United Kingdom of Great Britain and Northern Ireland

"United States" or "US"

the United States of America, its territories and possessions, any state of the United States and the District of Columbia

"US$", "USD", "US dollars" or "US$ cents"

the lawful currency of the United States

 

IMPORTANT NOTICE

 

The contents of this announcement have been prepared by and are the sole responsibility of ITE Group.

 

This announcement is not a prospectus but an advertisement and investors should not acquire any securities referred to in this announcement except on the basis of the information contained in the Combined Circular and Prospectus when published. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed by any person for any purpose on the information contained in this announcement or its accuracy, fairness or completeness. The information in this announcement is subject to change

 

A copy of the Combined Circular and Prospectus when published will be available from the registered office of ITE Group and on ITE Group's website at www.ite-exhibitions.com provided that the Combined Circular and Prospectus will not, subject to certain exceptions, be available to shareholders in certain excluded jurisdictions. Neither the content of ITE Group's website nor any website accessible by hyperlinks on ITE Group's website is incorporated in, or forms part of, this announcement.

 

This announcement is not for publication or distribution, directly or indirectly, in or into the United States. The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any announcement or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

 

This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy, securities to any person in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful. The securities will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or under any securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, exercised, resold, renounced, or otherwise transferred, directly or indirectly, in or into the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offering of the securities in the United States.

 

The offer and sale of securities referred to herein has not been and will not be registered under the applicable securities laws of Australia, Canada, Japan or South Africa. Subject to certain exceptions, the securities referred to herein may not be offered or sold in Australia, Canada, Japan or South Africa or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada, Japan or South Africa. There will be no public offer of the securities in Australia, Canada, Japan or South Africa.

 

No statement in this announcement is intended as a profit forecast and no statement in this announcement should be interpreted to mean that the future earnings per share, profits, margins or cash flows of the Enlarged Group will necessarily match or be greater than the historical published earnings per share, profits, margins or cash flows of the ITE Group.

 

This announcement does not constitute a recommendation concerning the Rights Issue. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

 

Investec Bank plc ("Investec") is authorised by the Prudential Regulation Authority (the "PRA") and regulated in the United Kingdom by the FCA and the PRA and is acting exclusively for the Company and for no one else in connection with the Acquisition and the Rights Issue, will not regard any other person(s) (whether or not a recipient of this announcement) as its client(s) in relation to the Acquisition or the Rights Issue and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing any advice in connection with the Acquisition, the Rights Issue and/or any other matter, transaction or arrangement referred to in this announcement.

 

Numis Securities Limited ("Numis") is authorised and regulated in the United Kingdom by the FCA and is acting exclusively for the Company and for no one else in connection with the Rights Issue, will not regard any other person(s) (whether or not a recipient of this announcement) as its client(s) in relation to the Rights Issue and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing any advice in connection with the Rights Issue and/or any other matter, transaction or arrangement referred to in this announcement.

 

Apart from the responsibilities and liabilities, if any, which may be imposed on Investec and Numis under FSMA or the regulatory regime established thereunder, none of Investec, Numis or any of their respective affiliates, directors, officers, employees, agents or advisers accepts any responsibility or liability whatsoever for, or makes any representation or warranty, express or implied, as to, the contents of this announcement, including its accuracy, fairness, sufficiency, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Acquisition or the Rights Issue, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available, and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Each of Investec, Numis and their respective affiliates, directors, officers, employees, agents and advisers accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

 

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Group's business, results of operations, financial position, liquidity, prospects, growth, strategies, integration of the business organisations and achievement of anticipated combination benefits in a timely manner. Forward-looking statements speak only as of the date they are made.

 

Such forward-looking statements are based on beliefs, expectations and assumptions of the Directors and other members of senior management regarding ITE Group's present and future business strategies, the timetable for integration of the Ascential Exhibitions Business, the benefits to be derived from the Acquisition and the environment in which ITE Group, the Ascential Exhibitions Business and/or, following Completion, the Enlarged Group will operate in the future. Although the Directors and other members of senior management believe that these beliefs and assumptions are reasonable, by their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the ITE Group Group's control. ITE Group, the Ascential Exhibitions Business and/or, following Completion, the Enlarged Group's actual operating results, financial condition, dividend policy and the development of the industry in which they operate, as well as the benefits and combination benefits actually received, may differ materially from the impression created by the forward-looking statements contained in this announcement. In addition, even if the operating results, financial condition and dividend policy of ITE Group, the Ascential Exhibitions Business and/or, following Completion, the Enlarged Group, and the development of the industry in which they operate, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to, general economic and business conditions, industry trends, competition, changes in government and other regulation, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, changes in political and economic stability and changes in business strategy or development plans, difficulties encountered in integrating the two organisations and/or achieving the anticipated combination benefits in a timely manner and other risks.

 

In comparing the events organised by the ITE Group and the Ascential Exhibitions Group, the Company regards the main comparators to be the number of exhibitors, number of attendees, floor space required and/or revenues generated by the event in question. A "market-leading" or "must-attend" event would, in the opinion of the Company, be one which was the leader across the most relevant (to the event concerned) of these comparators.

 

You are advised to read this announcement and the Combined Circular and Prospectus (if and when published) in their entirety for a further discussion of the factors that could affect ITE Group and/or the Enlarged Group's future performance. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.

 

Except as required by applicable laws and regulations, each of ITE, Investec, Numis and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward looking statement contained in this announcement whether as a result of new information, future developments or otherwise.

 

The person responsible for this announcement is Waterstone Company Secretaries Ltd, Company Secretary of ITE Group.

 

 

 

[1] The financial information for the Ascential Exhibitions Business has been extracted from the consolidated management accounts of Ascential Events Limited and subsidiaries, after removing results of events not being acquired, discontinued event revenue and profit, certain corporate allocations and other pro forma adjustments. The amounts are stated on a constant currency basis.

[2] Based on pro forma 2017 uncalendarised EBITDA.

[3] Based on pro forma 2017 uncalendarised EBITDA

[4] The financial information for the Ascential Exhibitions Business has been extracted from the consolidated management accounts of Ascential Events Limited and subsidiaries, after removing results of events not being acquired, discontinued event revenue and profit, certain corporate allocations and other pro forma adjustments. The amounts are stated on a constant currency basis.

[5] Based on pro forma 2017 uncalendarised EBITDA.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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