Acquisition of TE2 and accelerated bookbuild

12th July 2017 | accesso Technology Group Plc
  • Acquisition of customer engagement platform The Experience Engine (TE2) for £62.3 million ($80 million)
  • Placing to raise approximately £58.8 million ($75.6 million) via an accelerated bookbuild

accesso Technology Group plc (AIM: ACSO), the premier technology solutions provider to leisure, entertainment and cultural markets, is pleased to announce that it has today agreed to acquire, by way of merger with its wholly-owned U.S. subsidiary, the entire share capital of The Experience Engine (“TE2”), a privately-owned developer of software solutions which enables leading enterprises to offer a highly-personalised guest experience to their customers, primarily in the leisure, hospitality, entertainment and retail sectors. The acquisition is for an enterprise value of £62.3 million1 ($80 million), and is being funded by the issue of approximately $14.4 million in accesso shares to the Vendors and an underwritten vendor and cash placing to raise approximately £58.8 million ($75.6 million) via an accelerated bookbuild, which is being launched with immediate effect with this announcement (the “Announcement”).

Canaccord Genuity Limited (“Canaccord Genuity”) and Numis Securities Limited (“Numis”) (together the “Bookrunners”), which are both authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”), are acting as joint underwriters and bookrunners to accesso.

Overview of acquisition

Founded in 2013 by its management team led by CEO Scott Sahadi, COO Ray Atkin and Head of Technology Josh Bass, TE2 is based in San Diego, California and Orlando, Florida and has approximately 69 employees. TE2 has a growing customer base consisting of several leading theme park and leisure operators, with notable customers including Cedar Fair Entertainment, SeaWorld Parks & Resorts, Merlin Entertainments, and Carnival Corporation.

Rationale for the acquisition

The Directors of accesso (the “Board”) believe that TE2’s cloud based solution offers market-leading personalisation capabilities and data orchestration technologies which capture, model and anticipate guest behaviour and preferences not only pre- and post-visit online, but in the physical in-venue environment. Personalisation is achieved via many heuristics, including machine-learning-based recommendations, in order both to enhance guest experiences and to provide actionable analytics and insights to the operations, retail and marketing organisations.

The Board believes that the acquisition of TE2 will greatly complement and enhance accesso’s existing offerings, which help its enterprise customers both improve and monetise their customers’ experiences at leading venues and resorts worldwide. The Board also believes that accesso’s greater scale, customer relationships, sales and delivery capability, established reputation and capital resources should help accelerate adoption of TE2’s solution among new and existing customers.

TE2 senior management have indicated that they intend to remain with the enlarged company, with CEO Scott Sahadi reporting directly to accesso CEO Steve Brown.

The acquisition is expected to be marginally earnings enhancing to accesso’s adjusted earnings per share in the first full financial year following closing of the acquisition, with the full financial and strategic benefits of the acquisition being felt in 2019 and subsequent years.

[1] Based on an exchange rate of £0.78:$1.00 as at 11 July 2017.

Current trading

Further to the AGM statement published on 23 May 2017, the first part of the 2017 financial year has started strongly, with all parts of the business generating good momentum. As is normal for the Company, around 38% of the year has been traded to date. The integration of the Ingresso acquisition made in March 2017 continues to progress well and in line with management’s expectations, whilst the Merlin Entertainment roll-out also continues to plan. TE2 also continues to trade strongly as expected for a high growth business, with underlying revenue growing significantly during the first 5 months of 2017 versus the same period the previous year. The Board remains entirely focused on continuing to deliver value for shareholders.

Tom Burnet, Executive Chairman of accesso said:

“Our central aim at Accesso is to help operators drive revenue by improving the experience they provide for their guests. The addition of TE2 is the latest example of our commitment to that aim. In acquiring TE2, we further our technology leadership in this area, and enhance our ability to benefit fully from the scale we’ve achieved. “

Steve Brown, President and Chief Executive Officer of accesso said:

“We often speak about the quality of the Accesso experience and our belief that a truly customer-centric approach will be a genuine revenue driver for operators. This acquisition allows us to make that experience even more personal and relevant, using insights based on customer behaviour to empower operators like never before.”

Scott Sahadi, Chief Executive Officer of TE2 added:

“We’re delighted to be joining accesso, which provides a fantastic platform for us to continue our growth. Our businesses are highly complementary; both are passionate about providing outstanding customer experiences and know this is the ultimate differentiator in our industry. Everyone at TE2 is looking forward to a successful future working with our new colleagues”.

Further details of the acquisition and the Placing

The transaction is structured as a merger of a wholly-owned U.S. subsidiary of accesso with and into TE2’s corporate vehicle, Blazer and Flip Flops Inc., inclusive of net cash in that company, in consideration for its security holders (comprising chiefly the TE2 founders and management team, and employee shareholders and option holders, together with certain external individual, family trust and corporate investors) (the “Vendors”) receiving the following consideration:

(a) approximately $68.8 million in cash, to be funded by way of a vendor placing of new Ordinary Shares at the Placing Price (“Vendor Shares”) to be placed by the Bookrunners pursuant to the Bookbuild (“Vendor Placing”), such amount to be subject to customary escrow arrangements against potential warranty claims and working capital adjustments; and

(b) the issue of new Ordinary Shares at the Placing Price equal to approximately $14.4 million (“Consideration Shares”) to the Vendors of which $9.5 million will be issued to TE2 founders and certain senior management over a three year vesting schedule dependent on continued employment (“Founder Consideration Shares”).

The Vendor Placing is being launched by way of the Bookbuild with effect from the Announcement, together with a cash placing (“Cash Placing”) to raise an additional amount of approximately £5.3 million ($6.8 million) for working capital and general corporate purposes (including payment of transaction and Placing costs) for the enlarged company. The Vendor Placing and the Cash Placing (together, the “Placing”) have been underwritten by Canaccord Genuity and Numis Securities. Completion of the acquisition is expected to occur upon admission of the Placing Shares which is expected to be on or around 20 July 2017 following applicable TE2 shareholder consents.

Financial Information

Audited financial information on TE2 under US GAAP for the financial years ended 31 December 2015 and 2016 shows revenues rising from $2.2 million to $12.7 million and negative EBITDA (after expensing all development costs) of ($4.6 million) falling to ($3.1 million) in 2016. Profit before tax was ($3.2 million) in 2016. The approximately five-fold increase in TE2 revenues in 2016 over 2015 is largely attributable to development services revenues from two major new customer projects together with revenues of $2.6 million being recognised in relation to part of a major one-off licence fee from one of those customers which was invoiced and paid in 2016, with the balance treated as deferred income to be recognised in 2017 and 2018. Under IFRS accounting, accesso considers that the full licence would have been recognised in 2016 and accordingly does not anticipate recognising any post-acquisition revenues from this licence, although professional services revenues will continue. Excluding revenues related to this licence, TE2’s underlying revenues in 2016 would have been approximately $10.0 million, and taking into account an estimate of the adjustment that would be made to align to accesso’s adjusted EBITDA metric, reflecting the capitalisation of development costs under IFRS, TE2’s adjusted EBITDA in 2016 would have been approximately $(2.7 million).

TE2 revenues in the first five months of 2017 (excluding the one-off licence) are significantly ahead of the equivalent period of 2016, reflecting a continuing high level of development work on two major ongoing projects in particular. In addition to these, TE2 has a strong pipeline of prospects both with new customers and wider take-up within the estates of certain existing customers. TE2 continues to be on a high growth trajectory and on a standalone basis, expected to reach positive cash generation in late 2018.

The Placing

The Placing will open with immediate effect following this Announcement. The Placing Price will be decided at the close of the Bookbuild. The timing of the closing of the Placing, the number of Placing Shares, the Placing Price and allocations are at the discretion of the Bookrunners and a further announcement confirming these details will be made in due course. Members of the public are not entitled to participate in the Vendor Placing or the Cash Placing.

accesso intends to raise approximately £53.5 million ($68.8 million) of cash pursuant to the Vendor Placing and has agreed to procure that the net proceeds of the Vendor Placing are paid to the Vendors. The Company is also seeking to raise approximately £5.3m ($6.8 million) via the Cash Placing

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu with the existing Ordinary Shares including the right to receive all future dividends and distributions declared, made or paid by reference to a record date falling after their issue.

The Company will apply for Placing Shares and the Consideration Shares to be issued on closing, to trading on AIM (together, “Admission”). It is expected that settlement of subscriptions in respect of the Placing Shares and Admission will take place and that trading in the Placing Shares and those Consideration Shares to be issued on closing, will commence at 8.00 a.m. on Thursday, 20 July 2017.

The Placing is conditional upon, inter alia, Admission becoming effective and the conditions to closing under the Merger Agreement having been fully satisfied (save as to Admission occurring, and the Placing Agreement not having been terminated and having become unconditional in all respects). The Placing is also conditional upon the placing agreement between the Company and the Bookrunners (the “Placing Agreement”) becoming unconditional and not being terminated. Further details of the Placing Agreement can be found in the terms and conditions of the Placing contained in the Appendix to this Announcement (which forms part of this Announcement).

By choosing to participate in the Placing and by making a verbal offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement (including the Appendix) in its entirety and to be making such offer on the terms and subject to the conditions in this Announcement, and to be providing the representations, warranties and acknowledgements contained in the Appendix.

Your attention is drawn to the detailed terms and conditions of the Placing set out in the Appendix to this Announcement.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (“MAR”). Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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