The Board of Directors of IMS S.A. (“Company”, Issuer”) with reference to ESPI 41/2018 and 47/2018 reports informs that it signed today agreements to acquire 100% of shares of APR Sp. z o.o. with its registered office in Katowice (“APR”) and an investment agreement (“Agreement”) specifying the terms and conditions of settlements with previous shareholders and other major issues after the acquisition. The parties to the Agreement are: IMS S.A. as the purchaser, three natural persons holding together 100% shares in APR as sellers and the APR Company itself. The entire settlement shall be made in cash.
APR is a company operating for several years in the audiomarketing sector, whose business model is based on provision of music services to points of sale. At present APR has slightly over 3,000 locations to which it provides subscription audio services at home and abroad. After the acquisition, the Issuer’s Capital Group shall hold in total ca. 17,000 subscription locations.
For the Issuer, the acquisition of APR shall be a major step aimed at the consolidation of the sensory marketing market in Poland and further strengthening of the Issuer’s position as the market leader in Poland. Adding APR to the IMS Capital Group is also of key importance in view of considerable strengthening of the position of the Issuer’s Capital Group in the budget audiomarketing segment where the Issuer started to operate as of the beginning of this year and where most of the competitors operate.
The Board of Directors of the Issuer sees numerous synergies resulting from the acquisition of APR. The synergies include foremost the opportunity to launch to the part of APR clients a wide portfolio of services of IMS Group – aromamarketing, Digital Signage, audio advertising services, event services (income synergies). There are also significant opportunities regarding cost savings (cost synergies).
The acquisition of 100% of shares in APR is based on the earn-out model, on terms and conditions specified in the term sheet of 9 August 2018 (ESPI 41/2018 communication).
An extremely significant portion of the payment for the benefit of previous owners of APR (being at the same time the only members of the board of this company) depends on profits generated by APR for IMS Capital Group. The key provisions of the term sheet are as follows:
- The Issuer paid to the previous owners of APR on account of the acquisition of all shares the total price of PLN 3,750,000.00 gross, i.e. PLN 1,250,000.00 gross for each of the previous APR shareholders.
- An additional payment for shares depends on the net profit generated in the period from 01.07.2019 to 30.06.2020, i.e. in the period when APR is in the structure of the IMS Group. The payment shall range from PLN 1,550,000.00 gross, i.e. PLN 516,666.67 gross for each previous owner of APR if the net profit of at least PLN 700,000.00 is generated, to PLN 4,800,000.00 gross, i.e. PLN 1,600,000.00 gross for each of the previous owners of APR if the profit of at least PLN 1,600,000.00 is generated. The Issuer estimates that the net profit of APR in the period from 01.07.2019 to 30.06.2020 will amount to PLN 1.0 – 1.3 million.
For the purpose of the calculations indicated in paragraph 2 above, to specify the net profit, calculated in line with IFRS, all cost synergies after the acquisition of APR shares by IMS and a portion of the profit resulting from the sales of products and services of the previous IMS Group, i.e. the sales of advertising services as well as event, aromamarketing and Digital Signage services, are included. The portion of the net profit resulting from revenue from sales of products and services of the previous IMS Group may not exceed 20% of the net profit generated from previous activity of APR.
The Board of Directors of the Issuer estimates that the sum of payments mentioned in paragraphs 1 and 2 above will amount in total to ca. 5-8 times the net profit generated by APR for the IMS Group in the period from 01.07.2019 to 30.06.2020.
- If APR fails to generated in the period from 01.07.2019 to 30.06.2020 the net profit of at least PLN 700,000.00 calculated in line with the rules specified above but at the same time higher than PLN 400,000.00, previous shareholders of APR shall pay for the benefit of IMS the total amount of PLN 300,000.00 (PLN 100,000.00 each of previous shareholders). If the profit generated in the above mentioned period is PLN 400,000.00 or lower, previous shareholders of APR shall pay for the benefit of IMS the total amount of PLN 750,000.00 (PLN 250,000.000 each of previous shareholders). All the above mentioned sums are secured by notary statements of submission to enforcement.
- So as to additionally motivate previous shareholders of APR to achieve the best possible financial results in the coming years, the Issuer shall make an additional payment for the earlier acquired Shares, for the periods specified as below, to be shared equally among previous shareholders of APR: i. 01.07.2020-30.06.2021 – 25% of the net profit of APR for this period, ii. 01.07.2021-30.06.2022 – 25% of the net profit of APR for this period, iii. 01.07.2022-30.06.2023 – 25% of the net profit of APR for this period, iv. 01.07.2023-30.06.2024 – 25% of the net profit of APR for this period.
The net profit means the net profit calculated in line with IFRS, without exclusions specified in paragraph 2 above.
- The previous shareholders of APR being at the same time members of the board are guaranteed a seat on the board for the period of 5 years of the conclusion of the Agreement. The remuneration of the above mentioned members of the board is established based on the regulations for remunerating members of the board in the Issuer’s subsidiaries. The Issuer has the right to appoint the majority of the board of APR.
- Each of the previous shareholders of APR signed today a non-competition agreement. The agreement provides for the non-competition obligation of five years of the termination of the collaboration of a given partner with the IMS Capital Group. The fine for the breach of the non-competition obligation shall be PLN 700,000.00.
Selected financial data of APR Sp. z o.o. (prepared in line with the Accounting Act , not reviewed by an auditor) for the last two completed financial years, i.e. 2017 and 2016 are as follows:
Revenue: PLN 2,342 thousand PLN
EBIT: PLN 455 thousand PLN
EBITDA: PLN 555 thousand PLN
Net profit: PLN 389 thousand PLN
Non-current assets: PLN 868 thousand PLN
Inventories: PLN 125 thousand PLN
Receivables: PLN 298 thousand PLN
Cash: PLN 129 thousand PLN
Equity: PLN 566 thousand PLN
Liabilities: PLN 879 thousand PLN
Revenue: PLN 1,078 thousand PLN
EBIT: PLN 69 thousand PLN
EBITDA: PLN 115 thousand PLN
Net profit: PLN 50 thousand PLN
Non-current assets: PLN 707 thousand PLN
Inventories: PLN 53 thousand PLN
Receivables: PLN 62 thousand PLN
Cash: PLN 56 thousand PLN
Equity: PLN 177 thousand PLN
Liabilities: PLN 707 thousand PLN