Reach4entertainment Enterprises : 22 Feb 2019 Conditional Acquisition of Agency Press Limited ‘Sold Out’.

RNS Number : 8056Q

Reach4Entertainment Enterprises plc 22 February 2019

reach4entertainment enterprises plc

("r4e" or "the Company" or "the Group")

Conditional Acquisition of Agency Press Limited 'Sold Out'

Conditional Placing to raise net proceeds of up to approximately £3 million

reach4entertainment enterprises plc (AIM: R4E) the entertainment marketing communications group, today announces its proposed Acquisition of Agency Press Limited (trading as "Sold Out"), an independent full-service advertising agency, which, in part, will be funded by way of a conditional placing. The Company has provisionally placed 250,000,000 new Ordinary Shares at 1.2 pence per share and the Placing will raise gross proceeds for the Company of £3 million.

London-based integrated agency Sold Out, has specialised in arts and entertainment advertising for over 25 years. During this period it has established a strong reputation in its field and built a portfolio of high profile clients, which includes S.J.M. Concerts, AEG Presents, Live Nation and Cirque Du Soleil. Its services include campaign development, media planning and buying, events, partnerships, design and creative, broadcast and digital media production; all of which will bolster r4e's group offering. In the financial year ended 31 May 2018, Sold Out delivered gross profit of £4.1 million, adjusted EBITDA of £1.7 million and profit before tax of £1.3 million.

The consideration for the Acquisition comprises an initial consideration of £3.94 million payable in cash and £250,000 payable in 20,833,333 Ordinary Shares on completion (the "Initial Consideration") and additional

deferred cash consideration based on the financial performance of Sold Out during the period commencing on 1 June 2017 to 31 December 2021, excluding working capital adjustments (the "Deferred Consideration"). The aggregate of the Initial Consideration and the Deferred Consideration is to be capped

at £10 million. The net proceeds of the Placing are to be used to finance the Initial Consideration.

Transaction Highlights:

• • £3 million raised in Placing with new and existing investors

• • Net proceeds of the Placing will be used to finance the acquisition, together with the associated transaction costs

• • Sold Out is an independent full-service advertising agency:

  • o track-record of delivering successful campaigns across multiple genres including live music, festivals, comedy, sport, venues and events

  • o key clients include S.J.M. Concerts, AEG Presents, Live Nation, Maidwell Marketing, Cirque Du Soleil, EMG, Phil McIntyre Entertainments and Kilimanjaro

• • Acquistion of Sold Out is in line with the Group's strategy to develop a pipeline of new opportunities, both within and outside the live entertainment sector, and will diversify the Group's client base

• • The Board believes that the Acquisition will be substantially earnings enhancing in the first full year of ownership

• • The Acquisition will combine Sold Out's complementary capabilities of specialised advertising and offering principally planning and buying solutions, with r4e's fully integrated marketing and

  communications offering covering creative, strategy, website building, ticketing and analytics

Related Party Transactions:

Marc Boyan has agreed to participate in the Placing through Miroma R4E Holdings Limited, a company of which he is a director and controlling shareholder. Marc has subscribed for 8,333,333 Ordinary Shares, amounting to £100,000. Paul Summers and James Charrington who are both directors of subsidiary companies of r4e have also participated in the Placing. Paul Summers has subscribed for 2,083,000 Ordinary Shares, amounting to £24,996 and James Charrington has subscribed for 416,667 Ordinary Shares amounting to £5,000.

As part of the Placing, Nigel Wray, via his investment company, Euroblue Investment Limited and his

Charitable Trust, The Priory Foundation, and Herald Investment Management (together, the "Substantial

Shareholders") have each agreed to subscribe for 33,333,333 Placing Shares at the Placing Price.

The participation of Miroma R4E Holdings Limited, Nigel Wray, Herald Investment Management, Paul Summers and James Charrington in the Placing, constitute related party transactions pursuant to Rule 13 of the AIM Rules. Accordingly, the independent Directors (excluding Marc Boyan), after having consulted with the Company's nominated adviser, Grant Thornton, consider that the terms of subscription to Placing Shares by Miroma R4E Holdings Limited, Nigel Wray, Herald Investment Management, Paul Summers and James Charrington are fair and reasonable insofar as Shareholders are concerned.

With the consent of r4e's existing debt provider, the Initial Consideration will be funded in part by way of a £500,000 loan provided by In The Loop Limited, a company of which Marc Boyan, the CEO of r4e, is the ultimate beneficial owner. The loan bears interest at 5 per cent. accruing over a period of 5 years. The debt is unsecured and is to be subordinated to the Company's existing facility. The Independent Directors

(excluding Marc Boyan), after having consulted with the Company's nominated adviser, Grant Thornton, consider that the terms of the loan are fair and reasonable insofar as Shareholders are concerned.

Following Admission, Marc Boyan will be interested in 135,000,002 Ordinary Shares, representing approximately 10.6 per cent. of the Enlarged Share Capital, Mr Wray will be interested in 228,959,503

Ordinary Shares and a non-beneficial interest in 25,000,000 Ordinary Shares, representing approximately 19.8 per cent. of the Enlarged Share Capital and Herald Investment Management will have an interest in 184,006,824 Ordinary Shares, representing approximately 14.4 per cent. of the Enlarged Share Capital.

Lord Michael Grade, Chairman of R4E, commented: "The acquisition will mark a significant milestone for the Group and play a major role in diversifing our client base beyond just theatre. Sold Out has built an excellent reputation within the entertainment sector and has a high-quality, long term client base to match.

It has delivered many successful campaigns across live music, festivals, sports and events, which are all areas where r4e is seeking to move in to. Bringing Sold Out into the Group will enable us to strengthen our entire marketing and advertsing offering."

For information, please contact: reach4entertainment enterprises plc Marc Boyan, CEO

Phone: +44 (0)20 7968 1655

Paul Summers, COO

Yellow Jersey PR Charles Goodwin Harriet Jackson

Phone: +44 (0)7747 788 221 / +44 (0)7544 275 882 Email:r4e@yellowjerseypr.com

Grant Thornton, NOMAD Philip Secrett

Phone: +44 (0)20 7383 5100

Jen Clarke Seamus Fricker

Dowgate Capital, Broker James Serjeant

Phone: +44 (0)20 3903 7715

David Poutney

1.

Introduction and summary

The Company announced on 22 February 2019 that it had agreed to acquire the entire issued share capital of Sold Out, an independent full-service advertising agency which has specialised in arts and entertainment for over 25 years (the "Acquisition"). Total consideration for the Acquisition will be capped at £10 million in cash, which, in part, will be funded by way of a Placing to certain of the Company's existing Shareholders and new investors. The Company has provisionally placed 250,000,000 new Ordinary Shares at 1.2 pence per share and the Placing will raise gross proceeds for the Company of £3 million. The Board believes that the acquisition will be substantially earnings enhancing in the first full year of ownership.

The consideration for the Acquisition comprises an initial consideration of £3.94 million payable in cash and £250,000 satisfied by the issue and allotment of the Consideration Shares on completion (the "Initial

Consideration") and additional deferred cash consideration based on the financial performance of Sold Out during the period commencing on 1 June 2017 to 31 December 2021, excluding working capital adjustments (the "Deferred Consideration"). The aggregate of the Initial Consideration and the Deferred Consideration is to be capped at £10 million. The net proceeds of the Placing are to be used to finance the Initial Consideration.

The issue of the Placing Shares and the Consideration Shares is conditional, inter alia, upon the approval by Shareholders of the Resolutions to be proposed at the General Meeting of the Company convened for 15 March 2019. Subject to Shareholders approving the Resolutions to be proposed at the General Meeting, it is expected that Admission of the Placing Shares will take place on or around 19 March 2019 and Admission of the Consideration Shares will take place on or around 22 March 2019.

The Placing Shares and Consideration Shares are not being offered on a pro rata basis to existingShareholders and accordingly the Placing is conditional, inter alia, upon Shareholders resolving to disapply statutory pre-emption rights. Shareholders will find set out in the Circular a Notice of General Meeting which has been convened for 10.00 a.m. on 15 March 2019 at which resolutions will be proposed to approve the allotment and issue of the Placing Shares and the Consideration Shares and to dis-apply statutory pre-emption rights in respect of such allotment.

2.

Background to and rationale for the Placing and Acquisition

Following a year of considerable progress for the Group in 2018, after the strategic overhaul of its core operations which has led to an improvement in performance and profitability, the Directors believe that the Company is well positioned to execute its strategy to develop commercial opportunities beyond theatre, which has been its sector focus to date.

Background to the Company

R4e is a leading integrated live entertainment communications group comprising several branding, design and advertising companies that deliver a breadth of market leading services to the theatrical, film and entertainment sectors. Its portfolio of agencies includes Dewynters, Newman Displays Limited, SpotCo, Wake the Bear and Story House. The Company is headquartered in London with offices in New York, Amsterdam and Hamburg and has over 200 employees. In London and New York, the Company has built a strong platform in the world's foremost theatrical markets and continues to expand its client base into neighbouring verticals and markets.

Information on Sold Out

Sold Out is an independent full-service advertising agency which has specialised in arts and entertainment for over 25 years. It is based in London with 35 employees. As a result of its strong client relationships it enjoys a healthy market share of advertising within the arts and entertainment market. Its key clients include S.J.M. Concerts, AEG Presents, Live Nation, Maidwell Marketing, Cirque Du Soleil, EMG, Phil McIntyre Entertainments and Kilimanjaro.

Sold Out has a long track-record of delivering successful campaigns across multiple genres including live music, festivals, comedy, sport, venues and events. It delivered gross profit of £4.1 million, adjusted EBITDA of £1.7 million and profit before tax of £1.3 million in the financial year ended 31 May 2018. Its key service offerings include:

• • strategic campaign development and implementation,

• • media planning and buying (TV, digital, print, outdoor, radio and cinema),

• • event marketing and management,

• • media promotions and partnerships,

• • design and creative across all media within its in-house design department, and

• • TV, radio and digital production.

Rationale for the Acquisition

The Board believes that the acquisition of Sold Out will unlock significant opportunities for r4e to cross-sell its existing service offering in addition to the potential to pool resources around its core competencies over the longer term.

The Acquisition will combine Sold Out's complementary capabilities of specialised advertising and offeringprincipally planning and buying solutions, with r4e's fully integrated marketing and communications offering covering creative, strategy, website building, ticketing and analytics. Additionally, it will provide an opportunity to cross sell additional services to a new client base, with r4e's principal client-focus being core marketing communications activities in the theatrical sector and Sold Out's primary focus being on live events, including live music, festivals, comedy and sport.

3.

The Placing

The Company proposes to raise approximately £3 million (before expenses) through the issue of the Placing Shares at the Placing Price, which represents a discount of 0 per cent. to the closing bid price of 1.2p per Existing Ordinary Share on 21 February 2019, being the latest Dealing Day prior to the publication of this document. The Placing Shares will represent 19.6 per cent. of the Company's Enlarged Share Capital.

The terms of the Placing

Dowgate Capital, as agent for the Company, has agreed to use its reasonable endeavours to procure subscribers for the Placing Shares. Dowgate Capital has conditionally placed the Placing Shares with certain existing Shareholders and new institutional and other investors at the Placing Price. The Placing has not been underwritten by Dowgate Capital. Completion of the Placing is conditional upon, inter alia, the Resolutions being duly passed at the General Meeting and Admission becoming effective on or before 8.00 a.m. on 19 March 2019 (or such later time and/or date as the Company and Dowgate Capital may agree, but in any event by no later than 8.00 a.m. on 29 March 2019).

The Company has given certain undertakings to Dowgate Capital in relation to, inter alia, the accuracy of the information in this document. In addition, the Company has agreed to indemnify Dowgate Capital in relation to certain liabilities it may incur in respect of the Placing. Dowgate Capital has the right to terminate its engagement (but not the Placing) in certain circumstances prior to Admission, in particular, in the event of a material breach of the undertakings given to Dowgate Capital in its engagement letter, the failure of the Company to comply in any material respect with any of its obligations under the engagement letter or the occurrence of a force majeure event in respect of the Company. The Directors believe that raising new funds by way of the Placing is the most appropriate method of funding the Company at the present time.

The Board considers that a general offer to existing Shareholders by way of rights or other pre-emptive issue is not appropriate at this stage of the Company's development due to the significant additional costs

that would be incurred and the delay that would be caused by the production and approval of a prospectus.

Settlement and dealings

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission of the Placing Shares will become effective at 8.00 a.m. on 19 March 2019.

The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares including the right to receive dividends and other distributions declared following Admission.

Director's participation in the Placing

Marc Boyan has agreed to participate in the Placing through Miroma R4E Holdings Limited, a company of which he is a director and controlling shareholder, as follows: