Press release: 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:
o Expected to be earnings enhancing in the first full year following Completion (FY2019)
o The Directors expect to be able to maintain ITE’s existing dividend policy following Completion
o 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.”