Electric Word : Proposed sale of 70 per cent. interest in iGaming Business Limited - 18/12/2015

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18 December 2015

Electric Word plc

Proposed sale of 70 per cent. interest in iGaming Business Limited

Electric Word plc (AIM: ELE, "Electric Word", the "Company") today announces that it has conditionally agreed to sell its indirect 70 per cent. shareholding in iGaming Business Limited ("iGB"), to Clarion Events Limited ("Clarion"), a global events business with a portfolio of event and media businesses across a range of vertical markets. The Sale values the whole of iGB on a cash free debt free basis at £19.7 million. The holder of the remaining iGB Shares, Michael Caselli, has also agreed to sell 5.1 per cent. of the issued iGB Shares and will retain the balance.

Highlights

• Conditional sale of 75.1 per cent. of the shares of iGB, 70 per cent. by SBG, a wholly- owned subsidiary of Electric Word (who holds 70 per cent. of iGB), and 5.1 per cent by Mr Caselli (who holds 30 per cent. of iGB), which values the whole of iGB on a cash free debt free basis at £19.7 million.

• The Gaming Interests generated 2014 revenues of £5.4 million and 2014 EBITDA of

  £2.0 million after allocation of central costs.

• The base cash consideration payable to SBG of £13.8 million will be adjusted to reflect SBG's share of Net Debt and Net Working Capital at Completion.

• Net cash proceeds of the Sale receivable by SBG on Completion are expected to be £12.2 million.

  
  

• Electric Word considers that iGB's potential can best be realised within a business with a larger events portfolio and online gaming, which is the focus of iGB's business, has a different risk profile than that faced by the Group's other operations.

  
  

• The Sale is also in line with the Existing Group's strategy of concentrating on a smaller number of markets to enable the Existing Group to make more focused investments in developing higher-value digital products and related services.

  
  

• The Board is considering making a capital return to shareholders.

  
  

• The Sale is, inter alia, subject to Shareholder approval.

A circular will be distributed to Shareholders as soon as practicable ahead of a General Meeting convened to seek the approval of Shareholders for the Sale, which is expected to take place at 10.00 a.m. on 4 January 2016, and will shortly be available on the Company's website at www.electricwordplc.com.

Julian Turner, Chief Executive of Electric Word, said:

"I am delighted that we have reached agreement to sell iGB to Clarion at an attractive valuation. iGB has performed exceptionally well in recent years, led by a talented management team and exceptional staff. I would like to thank them for their excellent work over ten years as part of Electric Word and I strongly believe that both they and the business will continue to thrive under Clarion's ownership."

Enquiries

Electric Word plc +44 (0) 20 7265 4170

Julian Turner, Chief Executive William Fawbert, Finance Director

Trillium Partners Limited (Financial adviser to Electric Word)

Philip Mastriforte Andrew Zelouf

Panmure Gordon (UK) Limited (Nominated adviser and broker to Electric Word)

Andrew Potts

Notes to Editors

+44 (0) 20 3008 8375

+44 (0) 20 7886 2500

Electric Word plc is a specialist media group supporting professional education, compliance and management through a wide range of digital, paper and live formats. Its approach is to identify niche communities within its market sectors and fulfil their key information, professional development, best practice and compliance needs.

Increasingly, its aim is to provide higher-value services and decision-critical data that help its customers to achieve their key personal and organisational objectives. It achieves this by developing a deep understanding of its sectors and its customers' challenges and critical information requirements.

Electric Word provides content in many different formats, including subscription websites, journals, magazines, events, face-to-face training, online training, books, special reports, bespoke research and consultancy. Competencies developed in one sector can then be transferred to another as opportunities arise.

Trillium Partners Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Electric Word plc and no one else in connection with the matters referred to in this announcement and apart from the responsibilities and liabilities, if any, which may be imposed on Trillium Partners Limited by the Financial Services and Markets Act 2000 and the regulatory regime established thereunder, Trillium Partners Limited will not be responsible to anyone other than Electric

Word plc for providing the protections afforded to clients of Trillium Partners Limited or for providing advice in relation to the matters referred to in this announcement.

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

Proposed sale of 70 per cent. interest in iGaming Business Limited

1. Introduction

   
   

   Electric Word announces today that its wholly-owned subsidiary, SBG, has entered into a conditional agreement with Clarion pursuant to which SBG has agreed to sell its 70 per cent. shareholding in iGB to Clarion. The holder of the remaining iGB Shares, Michael Caselli, has also agreed to sell 56,100 iGB Shares to Clarion, representing 5.1 per cent. of the issued iGB Shares, and will retain the balance.

   
   

   The Transaction values the entire issued share capital of iGB on a cash free debt free basis at

   £19.7 million.

   
   

   The base cash consideration payable to SBG of £13.8 million will be adjusted by SBG's share of Net Debt and Net Working Capital, to be calculated through a completion accounts process. After taking into account the Group's costs associated with the Sale and the repayment of an intercompany balance owing by the Continuing Group to iGB, it is expected that the net proceeds of the Sale receivable by SBG on Completion will be approximately

   £12.2 million.

   
   

   Pursuant to Rule 15 of the AIM Rules, the Sale is deemed to constitute a fundamental change of business of the Company, which requires the approval, by way of an ordinary resolution, of the Shareholders at the General Meeting.

   
   

2. Background to and reasons for the Sale

The Company acquired SBG in early 2006 for £2.7 million, and included as part of the acquisition was a controlling interest in iGB. iGB has grown strongly since 2006, particularly since developing a magazine and a series of conferences aimed at gaming affiliates with the assistance of a US-based joint venture partner, Affiliate Media. Affiliate Media provided marketing support for the iGB affiliate business in return for a share of the net profit from the joint venture pursuant to the terms of the Affiliate Contract. In January 2011, SBG bought Affiliate Media out of its benefits and obligations under the Affiliate Contract. Following the Sale, SBG will no longer be in a position to fulfil its obligations under the Affiliate Contract, which will therefore be terminated on Completion for no consideration. After Completion, SBG will receive no further share of the net profit from the Affiliate Contract.

Given the Existing Group's controlling 70 per cent. interest in iGB, the results of iGB are consolidated as part of the Existing Group's financial statements, and the 30 per cent. interest in iGB held by Mr Caselli has been reflected as a non-controlling interest in the Existing Group's consolidated income statement.

For the year ended 30 November 2014, the Gaming Interests generated revenues of £5.4 million and EBITDA of £2.0 million after allocation of central costs. These figures are unaudited and have been extracted from the Existing Group's consolidated financial statements for the year ended 30 November 2014.

Over the last four years, the gaming events business has grown significantly. With the majority of the profits of the Gaming Interests now derived from the events business, the Directors consider that the potential of the business can best be realised within a business