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Attention Business Editors
Cyberplex Inc. announces agreement to acquire Tsavo media to create Canadian leader in internet advertising
Highly strategic acquisition of leading online media publisher will
broaden Cyberplex's proven online distribution platform
/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S.
NEWSWIRE SERVICES./
TORONTO, May 18 /CNW/ - Cyberplex Inc. (TSX: CX) a global leader in
performance-based online marketing and technology solutions today announced
that it has entered into agreements with respect to a series of transactions
involving:
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- the acquisition of leading online media publisher, Tsavo Media, in a
transaction valued at approximately US$75 million (the "Tsavo
Acquisition"); and
- a C$30.25 million bought deal private placement of subscription
receipts.
>>
The Tsavo Acquisition is subject to customary closing conditions and is
expected to be completed on or about June 8, 2010.
The Tsavo Acquisition
"We are focused on delivering the best performance marketing solutions to
our clients," said Geoffrey Rotstein, President and CEO of Cyberplex. "This is
a highly strategic and transformational event for us as it takes our
leadership position in developing performance based advertising campaigns and
combines it with a leader in targeted distribution. By matching Tsavo's media
properties and search marketing capabilities with Cyberplex's network of over
10,000 publishing partners, Cyberplex will offer an unprecedented value
proposition to tier one advertising clients and an extremely targeted
advertising platform. The individual capabilities of Cyberplex and Tsavo are
complementary and together the combined entity will constitute one of the
largest online advertising companies in Canada."
Tsavo's ability to drive search traffic to the hundreds of campaigns
being promoted through the Cyberplex network will provide for an enhanced
client experience and represents considerable growth potential for both
organizations. Search marketing is and continues to be one of the most
effective methods to target and understand consumer intent and is an essential
part of performance marketing.
Headquartered in Waterloo, Ontario, Tsavo Media is a leading online
publisher, featuring a dynamic and diverse family of Web properties. The
company has a demonstrated track record of growth and profitability and in
2009 generated revenue of approximately US$110 million and EBITDA of
approximately US$16.7 million, excluding management fees paid to its owners.
Tsavo Media's current portfolio includes over 300 unique consumer websites,
informational properties and social media blogs which generate over 30 million
unique visitors per month. Ted Hastings, President and CEO of Tsavo Media,
will take on the role of President in the combined organization and all other
senior executives of Tsavo Media will remain with the organization. It is
expected that this transaction will be immediately accretive for the combined
entity.
"We are thrilled to be combining our efforts with Cyberplex," said
Hastings. "There are meaningful synergies between our two companies that will
provide value to our combined customer base. We have been investing in our
traffic platform for several years and believe that the combination of our
business with Cyberplex will allow us to leverage those investments and
diversify our revenues while expanding margins. By bringing together two of
Canada's top Internet companies and their respective expertise and skills, we
are creating the foundation for a next generation Internet company -
integrated performance from the initial click to a desired outcome for our
clients."
"This is the largest and most impactful acquisition in the history of
Cyberplex. We believe that it represents the next phase of growth in building
a dominant Internet media company that will create significant value for our
clients, shareholders and employees," said Vernon Lobo, Chairman and
co-founder of Cyberplex.
Under the terms of the Tsavo Acquisition, the total purchase price
payable is US$75,000,000, subject to post-closing adjustments. The purchase
price is to be satisfied as to: (i) US$40,000,000, payable as to approximately
US$37,800,000 in cash, funded partially by the Offering (as described below),
and as to approximately US$2,200,000 in exchangeable shares which are
exchangeable into common shares at the same price as the Offering, and if
exchanged would result in approximately 4,160,000 common shares being issued
(the "Exchanged Shares"); and (ii) US$35,000,000 by way of vendor take-back
notes pursuant to a credit agreement to be entered into between the Tsavo
parent entity being acquired by Cyberplex, as borrower, and certain lenders
arranged by the vendors to be secured against a first priority security
interest on all of the assets of, and equity interests in, the Tsavo parent
entity and Tsavo's assets. Other than the future issuance of the Exchanged
Shares, the Tsavo Acquisition is being satisfied entirely in cash and through
the new senior credit facility.
As an inducement for three of Tsavo's existing key management personnel
to enter into contracts of full time employment with Cyberplex, Cyberplex will
loan such personnel an aggregate of approximately $1.185 million to purchase
an aggregate of approximately 2,154,545 Subscription Receipts (as defined
below) pursuant to the Offering. Each such arrangements will represent less
than 2% of the issued and outstanding common shares, and hence such
arrangements are being made in accordance with an exception from security
holder approval under TSX rules.
It is expected that the combined management teams of Cyberplex and Tsavo
will invest, by way of cash or share rollover approximately $4.6 million into
Cyberplex as part of the Offering and Tsavo Acquisition (collectively, the
"Transaction").
The Tsavo Acquisition is subject to certain conditions, including
completion of the Offering (as described below) and receipt of all required
approvals and consents. Cyberplex will be required to pay a break fee of
US$1.5 million if the Tsavo Acquisition agreement is terminated under certain
circumstances.
The Private Placement
To finance a portion of the Tsavo Acquisition, Cyberplex has entered into
an agreement with a syndicate of underwriters led by GMP Securities L.P. and
including Paradigm Capital Inc., M Partners Inc. and Scotia Capital Inc.
(collectively, the "Underwriters"), pursuant to which Cyberplex has agreed to
sell on a bought deal private placement basis, 55,000,000 subscription
receipts of Cyberplex (the "Subscription Receipts") at a price of $0.55 per
Subscription Receipt (the "Offering Price") for gross proceeds of $30,250,000
(the "Offering"). In addition, Cyberplex has granted to the Underwriters an
over-allotment option, exercisable up to 48 hours prior to closing of the
Offering, to purchase up to an aggregate of 8,250,000 additional Subscription
Receipts at the Offering Price for an additional $4,537,500 in gross proceeds,
on the same terms and conditions as set forth above.
Each Subscription Receipt will be exercisable, at no additional cost,
into one common share in the capital of Cyberplex, subject to the terms and
conditions described in greater detail below. The Offering is expected to
close on or about June 8, 2010.
The gross proceeds of the Offering less the costs and expenses of the
Underwriters and any fees payable to retail brokers in connection with the
Offering (the "Escrowed Funds") will be held in escrow and released to
Cyberplex to complete the Tsavo Acquisition following the satisfaction of
certain release conditions, including, receipt of all required approvals for
the Offering, including written shareholder consent and regulatory consents,
and the satisfaction of all conditions precedent to the Tsavo Acquisition,
other than payment of the purchase price thereof (the "Release Conditions").
If the Release Conditions are not satisfied on or before 5:00 p.m. (EST) on
July 30, 2010, or the Tsavo Acquisition is abandoned or terminated prior to
such date, holders of Subscription Receipts will receive in exchange for each
Subscription Receipt an amount equal to the Offering Price.
Each Subscription Receipt will be exercisable by the holder thereof at
any time following the date on which the Release Conditions are satisfied (the
"Escrow Release Date") and all unexercised Subscription Receipts shall be
deemed to be exercised automatically (for no further consideration and with no
further action on the part of the holder thereof) into one common share in the
capital of Cyberplex, subject to adjustment in certain events, upon: (a)
satisfaction of the Release Conditions; and (b) the earlier of: (i) the date
that is four months following the closing date of the Offering, and (ii) the
fifth business day after a receipt is issued for a (final) prospectus by the
securities regulatory authorities in each of the provinces of Canada where
Subscription Receipts are issued and sold qualifying the distribution of the
common shares of Cyberplex to be issued upon the exercise of the Subscription
Receipts.
Cyberplex has agreed to use commercially reasonable efforts to qualify
the distribution of the common shares issuable on exercise of the Subscription
Receipts within 30 days following the Escrow Release Date.
Cyberplex currently has 68,486,468 common shares issued and outstanding
on a non-diluted basis. The TSX has conditionally approved the Transaction,
subject to meeting all of the requirements of the TSX, including without
limitation, that no more than 67,410,000 common shares be issued in total
pursuant to all components of the Transaction, the receipt of shareholder
approval (as discussed below) and compliance with the other requirements of
the TSX. If the maximum number of common shares are issued pursuant to the
Transaction, this will result in the issuance of 67,410,000 common shares,
representing an increase equal to approximately 98.4% of the currently
outstanding common shares.
The Transaction will result in the issuance of greater than 25% of the
currently outstanding common shares. The rules of the TSX require that
Cyberplex obtain approval of the Offering from the holders of a majority of
the common shares. However, the rules of the TSX also provide that such
approval may be obtained in writing from shareholders holding more than 50% of
the common shares outstanding without the requirement to convene a
shareholders' meeting for such purposes. Cyberplex intends to rely on this
exemption in connection with obtaining the necessary shareholder approval for
the Offering.
In accordance with the rules of the TSX, to enable management, the board
of directors and all other insiders of Cyberplex (collectively, "Insiders") to
provide written approval for the Offering, Insiders will be limited to
purchasing such number of Subscription Receipts as is equal to 10% of the
common shares outstanding, after giving effect to any issuances to insiders of
common shares or other securities convertible into common shares during the
six month period prior to the closing of the Offering. It is anticipated that
this will limit Insider participation in the Offering to a maximum of
6,240,000 Subscription Receipts.
About Cyberplex
Cyberplex Inc. (www.cyberplex.com) is a leader in providing advertising
solutions, online customer acquisition strategies and technology development.
The Company, through its subsidiaries, leverages its proprietary affiliate
network, robust advertising relationships and experience, along with
technology design, development and solutions specialists to develop and
implement web-based programs and solutions that have a proven record in
delivering results.
With over 16 years of experience serving Fortune 1000 clients including
FTD, Vista Print, Sony Canada, IAC, Atlantic Lottery Corporation, Vista Print,
Aecon, Ontario Power Generation, Scotia Bank and the Royal Bank of Canada,
Cyberplex is frequently the firm of choice for business leaders looking for
effective and reliable online solutions. Cyberplex serves clients across
Canada and the US and is headquartered in Toronto, Canada.
About Tsavo Media
Based in Waterloo, Ontario, Tsavo Media develops highly relevant content
experiences for today's digital consumers, as well as niche content
monetization services to publishers. Fundamental demand for Tsavo's offering
continues to grow with the inevitable transition of online pricing models from
clicks to actions. The ability to intelligently identify consumer intent and
accurately match it with relevant and timely offers, will be critical for
delivering value for advertisers as they consistently move online in the
future. Tsavo has more than 300 websites offering consumer information in five
strategic categories - health & wellness, technology, lifestyle, education and
finance. Its network of sites attracts more than 30 million visitors each
month.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This press release may contain forward-looking statements. The statements
concerning Cyberplex's objectives, goals, strategies, intentions, plans,
beliefs, expectations and estimates, and the business, operations, financial
performance and condition of Tsavo Media, its subsidiaries and Cyberplex are
forward-looking statements. The words "believe", "expect", "anticipate",
"estimate", "intend", "may", "will", "would" and similar expressions and the
negative of such expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. These forward-looking statements are subject to important
assumptions, including the following specific assumptions: the ability of
Cyberplex and Tsavo Media to meet their respective revenue targets; the
ability to achieve cost synergies; the completion of the Tsavo Acquisition in
accordance with its terms; general industry and economic conditions; changes
in Cyberplex's and Tsavo Media's relationships with their customers and
suppliers; pricing pressures and other competitive factors; and changes in
regulatory requirements affecting the businesses of Cyberplex and Tsavo Media.
Cyberplex has also made certain macroeconomic and general industry assumptions
in the preparation of such forward-looking statements. While Cyberplex
considers these factors and assumptions to be reasonable based on information
currently available, they may prove to be incorrect.
Known and unknown factors could cause actual results to differ materially
from those projected in the forward-looking statements. Such factors include,
but are not limited to: failure to obtain written shareholder approval of the
Offering; general economic and business conditions; financing risk; risks
inherent in the business of operating Cyberplex and Tsavo Media, including the
inability to attract and retain qualified employees; competition; disruptions
in business operations; interest rate and foreign currency fluctuations;
existing governmental regulations and changes in, or the failure to comply
with, governmental regulations; and liability and other claims asserted
against Cyberplex. Furthermore, the amounts set out in this press release are
based on foreign currency exchange rates in effect on the date hereof and
there is no assurance that such foreign currency exchange rates will not
fluctuate in a manner that is adverse to Cyberplex. Given these uncertainties,
readers are cautioned not to place undue reliance on such forward-looking
statements.
All of the forward-looking statements made in this press release are
qualified by these cautionary statements and other cautionary statements or
factors contained herein, and there can be no assurance that the actual
results or developments will be realized or, even if substantially realized,
that they will have the expected consequences to, or effects on, Cyberplex.
Forward-looking statements are given only as at the date hereof and Cyberplex
disclaims any obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by applicable laws.
This news release does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities in the United States. The securities
have not been and will not be registered under the United States Securities
Act of 1933, as amended (the "U.S. Securities Act") or any state securities
laws and may not be offered or sold within the United States or to U.S.
Persons unless registered under the U.S. Securities Act and applicable state
securities laws or an exemption from such registration is available.
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/For further information: Alexzandria (Ali) Johnson, Marketing Manager,
Cyberplex Inc., 1255 Bay Street, Suite 400, Toronto, Ontario, M5R 2A9, p:
(416) 260-4482, f: (416) 597-2345, alexzandria.johnson@cyberplex.com/
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