Management Board of IMS S.A. (“Company”, “Issuer”), with reference to the ESPI report 11/2021, informs that today it signed agreements for the acquisition of 100% of shares of Audio Marketing Sp. z o.o. with its registered office in Koszalin (“AM”) and an investment agreement (the “Agreement”) defining the terms of settlements with the existing shareholders and other important issues after the acquisition. The parties to the Agreement are: IMS S.A. as the purchaser, five natural persons holding jointly 100% of the shares in AM as the transferor and AM itself. The entire settlement will be made in cash.
AM is a company operating for 10 years in the audio-marketing industry, whose business model is based on delivering music services to points of sale. AM currently has approximately 7,600 locations to which it delivers subscription audio services domestically and internationally. This is a significantly higher number of locations (by more than 20%) than at the date of the term sheet, i.e. 31 March 2021. Following the acquisition, the Issuer Group will have a total of approximately 28,400 subscription locations.
The acquisition of AM is a very important step for the Issuer aiming at consolidation of the sensory marketing market in Poland and even stronger strengthening of the Issuer’s position as the market leader in Poland. The Management Board of the Issuer sees numerous synergies resulting from the acquisition of AM. These synergies include first of all the possibility to introduce to some of AM’s clients a wide portfolio of IMS Group services – aromamarketing, Digital Signage, audio advertising services (revenue synergies). There are also significant opportunities for cost savings (cost synergies).
The acquisition of 100% of the shares in AM follows an earn – out model, on terms identical to those described in the term sheet dated 31 March 2021. (ESPI announcement 11/2021).
A very significant part of the consideration to the existing owners of AM (all of whom will continue to work for AM or cooperate with the company) will depend on the profits that AM will generate for the IMS Group. The key provisions of the Agreement are as follows:
- The Issuer paid to the existing owners of AM for the acquisition of 100% of the shares a total gross price of PLN 4,250,000.00.
- Additional payment for the shares will depend on the net profit earned in the period from 1 January 2022 to 31 December 2022, i.e. in the period when AM will be part of the IMS Group structures. This payment varies between PLN 1,550,000.00 gross to be distributed to all existing owners of AM with a net profit of at least PLN 750,000.00 to PLN 6,500,000.00 gross to be distributed to all existing owners of AM with a net profit of at least PLN 1,750,000.00.
For the purposes of the calculations indicated in para. 2 above, to determine the net profit, calculated in accordance with IFRS, all cost synergies following the acquisition by IMS of shares in AM are taken into account, as well as the part of the profit resulting from the sale of products and services of the existing IMS Group, i.e. from the sale of advertising, aromamarketing and digital signage services. The portion of the net profit derived from the sale of products and services of the existing IMS Group may not exceed 20% of the net profit derived from the existing operations of AM.
The Management Board of the Issuer estimates that the sum of payments mentioned in points 1 and 2 will amount in total to approximately 5-8 times AM’s net profit for the IMS Group in the period 01.01.2022 to 31.12.2022.
- In case when AM does not generate in the settlement period at least PLN 750,000.00 net profit calculated according to the rules described above but at the same time generates net profit equal or higher than PLN 500,000.00, the existing shareholders of AM will pay to IMS a guarantee amount of PLN 500,000.00 in total. In case of generating the net profit in the settlement period lower than 500,000.00 PLN the existing shareholders of AM will pay to IMS the guarantee amount in total amount of 1,000,000.00 PLN. All the aforementioned amounts are secured by notarial statements on submission to enforcement.
- In order to further motivate the existing shareholders of AM to achieve the best possible financial results in subsequent years, the Issuer will make an additional payment for the previously acquired Shares, for the periods specified below, to be distributed among the existing shareholders of AM:
- 01.01.2023-31.12.2023 – 17,5% of AM net profit for this period,
ii. 01.01.2024-31.12.2024 – 17,5% of AM net profit for this period,
iii. 01.01.2025-31.12.2025 – 17,5% of AM net profit for this period,
iv. 01.01.2026-31.12.2026 – 17,5% of AM net profit for this period,
Net profit means net profit calculated in accordance with IFRS, without the exclusions described in para 2 above.
- The existing shareholders of AM are guaranteed employment, regardless of its legal form, for a period of 5 years from the signing of the investment agreement. Two existing members of the Management Board of AM (who are also existing shareholders) are guaranteed a seat on the Board for the aforementioned period of 5 years. The Issuer has the right to appoint a majority of the Management Board in AM. The remuneration of the existing partners after the merger is determined based on the average remuneration of these persons for the years 2019 and 2020.
- In the event that AM or any of the existing shareholders does not proceed with the conclusion of the relevant investment agreement on the terms agreed in the term sheet document for any reason, each of the existing shareholders of AM shall pay, independently of the others, to the Issuer a guarantee penalty of PLN 150,000.00. The total guarantee penalty payable by all existing shareholders amounts to PLN 750,000.00. The above claims are secured by notarial statements on submission to execution. Additionally, the above claims are guaranteed for the total amount of PLN 750,000.00 by AM company (notarial statement on submission to enforcement).
- Each of the existing AM partners has today signed a non-competition agreement. The agreement provides for a non-competition clause for a period of 5 years after the termination of cooperation with the IMS Group by a given partner. The penalty for breach of the non-compete agreement is PLN 700,000.00.
The acquisition of Audio Marketing Sp. z o.o. fits perfectly into the development strategy of the Issuer’s Capital Group. It will add approx. 7,600 subscription locations to the Group’s customer portfolio, largely medium- and small-format FMCG locations not significantly affected by COVID-19 restrictions. AM has done very well – as did APR Sp. z o.o., which was acquired by the Issuer in October 2018. – has coped with the coronavirus crisis, posting earnings growth at every level and very good liquidity in 2020. The AM acquisition itself is completed on a model and terms almost identical to those of APR Sp. z o.o.