31st Oct 2012. Australia’s leading marketing services group, STW Communications Group Limited (ASX:SGN), has announced that it has agreed to acquire interests in four companies, comprising 75% of Markitforce, 80% of Maverick Marketing and Communications, 75% of Switched on Media and 40% of Amblique.
Calendar year 2013, the acquisitions will contribute contribute $29.8m revenue and $6.1m EBITDA (pre-synergy) to STW, representing an average multiple of 5 times Calendar Year 2013 EBITDA forecasts, on a pre-synergy basis.
STW has agreed to pay $30.6 million for the four acquisitions (which includes an estimate of the likely further performance related payments in future years), which are to be fully funded through a fully underwritten placement to qualified and sophisticated institutional investors to raise $33 million and a non-underwritten share purchase plan (SPP) to raise up to $7 million. Macquarie Capital (Australia) Limited is acting as the Sole Lead Manager and Underwriter.
The placement is at an issue price of $0.97 per new share, representing 9.4% of current shares on issue and a 7.2% discount to of STW’s closing share price of 29th October of $1.045. Martin Sorrell’s WPP plc, STW’s largest shareholder owning 20.7% of current shares on issue, have indicated that they will not be participating in the placement.
The four acquisitions and the placement are expected to be EPS neutral in CY13 on a pre-synergy basis. The remaining net proceeds from the placement and SPP will be used for the other acquisitions currently being evaluated and/or for general corporate purposes. These potential acquisitions include a privately owned market research company operating in Australia and New Zealand, a Singapore based digital interactive design company with a wide South East Asia footprint and a Singapore based social media specialist with offices in Indonesia, Malaysia and Thailand.
If the acquisitions do not proceed, the funds raised will be used to pay down debt.
Markitforce is an Australian leader in promotional campaign execution and point of sale fulfilment for local and global clients. Founded in Sydney in 2001, Markitforce has since opened offices in Melbourne, Brisbane, Adelaide, Perth and Auckland, and employs over 100 staff nationally.
Maverick is an Australian leader in experiential marketing from strategic and creative development through to execution. Based in Sydney, it has been operating for 12 years and currently employs 25 full time staff with a service offering that includes live consumer engagement through digital, PR, promotions and branded content.
Switched on Media (SOM) is a digital agency specialising in search engine marketing and social media with a blue chip client base and is complementary to STW’s existing digital portfolio. SOM was founded in 2007 and has 27 staff across its Sydney and Melbourne offices.
Amblique is a digital agency specialising in online strategy, e-commence and web development for a range of leading retailers. It was established in 2006 and has 60 staff in its Sydney offices.
On announcing the acquisitions, STW’s Chief Executive Officer, Mr Michael Connaghan, said “The acquisitions of Markitforce, Maverick, SOM and Amblique are important strategic investments for STW and are highly complementary to our existing portfolio of businesses. These acquisitions are in line with STW’s stated strategy and we look forward to building on the success these companies have already enjoyed.”
STW Group is Australasia’s leading marketing content and communications services group, comprising over 75 operating companies.
STW was originally spawned from John Singleton Advertising (JSA) in 1985. JSA was created after John’s first company SPASM was acquired by US-based DDB, and at the end of a 5-year industry “lockout”.The agency grew at a spectacular rate and was floated in 1994. JSA merged with a troubled Ogilvy & Mather in 1998 and made it profitable. STW Communications was formed and later bought 49% of JWT. It has since continued relentlessly on the acquisition trail, finally becoming Australia’s largest communications services group.
STW is now operating without its old guard. John Singleton sold his last stake in the business in 2007, and former chairs Russell Tate and Mark Carnegie and the majority of the original board members have left the company.