TIDMBLNX TIDMBRST
RNS Number : 5467E
Blinkx Plc
08 April 2011
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR
JAPAN
For immediate release
8 April 2011
ACQUISITION
OF
BURST MEDIA CORPORATION
BY
BLINKX PLC
Bringing online video to a wider audience: delivering blinkx's
35 million hours of content to Burst's 130 million unique users
The Boards of blinkx plc (AIM:BLNX), the world's largest video
search engine ("blinkx" or the "Company") and Burst Media
Corporation (AIM:BRST), the online advertising services and
technology business ("Burst") are pleased to announce today that
they have entered into a definitive agreement (the "Merger
Agreement") pursuant to which blinkx will acquire the entire issued
and to be issued shares of common stock of Burst for an aggregate
consideration of US$30 million (GBP18.5 million) to be satisfied by
the issue of New Blinkx Shares and, for Non-Accredited Investors,
in cash (the "Acquisition").
The combination of the two companies will bring blinkx's 35
million hours of online video and TV to Burst's audience of over
130 million unique users (source: comScore Media Metrix December
2010). blinkx will create contextually relevant video channels for
Burst's network of publishers, thereby aggregating an online video
audience for advertisers across long tail internet sites, which
will rival the scale of television networks.
Transaction Highlights
-- Burst's network of publishing partners reaches over 61 per
cent. of the US online population. It ranks as the 36(th) largest
US media property and the 30(th) largest UK media property on the
internet (source: comScore Media Metrix December 2010). Working
together with web publishers and advertisers, Burst enables brands
to reach loyal, highly segmented audiences in a quality-assured
environment
-- Following the Acquisition, blinkx intends to drive
significant expansion of its audience through embedding relevant
videos and video channels into Burst's network of publisher sites.
In addition to improving the user experience for consumers, this is
expected to allow for the sale of video advertising, which
typically attracts a significantly higher CPM, increasing the
revenue earned by sites that carry the combined solution
-- Targeted changes taken to focus Burst's business mean the
Acquisition is expected to have a go-forward revenue run rate of
US$33 to 34 million. blinkx expects the Acquisition to be earnings
accretive for the year ending 31 March 2012
-- blinkx believes that Burst customers will benefit from
working with the internet's leading video search engine with
greater financial resources, technology leadership and additional
customer-facing strengths in sales and support. The display banner
advertising that is currently sold on Burst's networks attracted an
average CPM of US$1.49 over the year ended 31 December 2010;
blinkx's standard, untargeted video pre-rolls were priced at a CPM
of US$20 in 2010, reflecting the demand for its highly engaging
contextual video advertising products. blinkx believes that the
combined group will be able to realise some of the differential
between these two rates and share the resulting value with its
publishers through combining the scale of Burst's network with
blinkx's video products. Given this should also deliver an
improved, richer experience for end users, blinkx believes the
combination will represent a win-win-win proposition for users,
publishers and advertisers
-- The majority of Burst's senior management team will continue
with the combined group, with Jarvis Coffin, Co-Founder and CEO of
Burst and David Stein, Co-Founder and CTO of Burst remaining in
temporary roles to assist transition
-- blinkx's cash balance on 31 March 2011 was approximately
US$52.8 million. Cash consideration payable under the terms of the
Acquisition is not expected to exceed US$4.5 million
-- Pursuant to the Merger Agreement Burst stockholders will
receive US$0.4093 (25.08 pence) in cash or New Blinkx Shares, per
Burst Share held by them (the "Per Share Amount")
Commenting on the Acquisition, Suranga Chandratillake, Chief
Executive of blinkx, said:
"In just a few years, we have seen online video advertising
become the fastest growing segment of online advertising. Up until
now, the primary barrier to further television advertising budgets
moving online has been online video's inability to match the sheer
scale of audience that television can deliver. We are extremely
excited about the Acquisition as it will allow us to overcome that
challenge: by fusing blinkx's unique patented technology and large
video index with Burst's massive reach, we will have the potential
to create personalised, online television that is watched by
hundreds of millions of users."
Commenting on the Acquisition, Jarvis Coffin, Chief Executive of
Burst, said:
"Since 1995, Burst has supported the interests of vertical web
sites online and the loyal users that depend on them for the
information they need and want. By combining with blinkx and its
enormous video index, we will be able to substantially enhance our
users' experience with high quality, relevant video, and also
improve monetisation for our publishers through high value video
advertising.
Burst stockholders are receiving a substantial premium for their
Burst Shares and those who receive their consideration in New
Blinkx Shares will hold stock in a bigger, more liquid company with
an opportunity to participate in the high growth online video
market where blinkx is one of the market leaders."
Enquiries:
blinkx plc
Suranga Chandratillake, Chief Executive Officer +1 415 655 1450
Jonathan Spira, Chief Financial Officer
Burst Media Corporation
Jarvis Coffin, Chief Executive Officer +1 781 852 5271
Steve Hill, Chief Financial Officer
Canaccord Genuity Limited (Financial Adviser
to blinkx)
Rory O'Sullivan +44 20 7050 6500
Christopher Fincken
Citigroup Global Markets Ltd (NOMAD and Broker
to blinkx)
Charles Lytle +44 20 7986 4000
Christopher Wren
Altium (Financial Adviser and NOMAD to Burst)
Tim Richardson +44 20 7484 4040
Paul Chamberlain
Financial Dynamics (PR Adviser to blinkx)
Edward Bridges +44 20 7831 3113
Charles Palmer
Haya Herbert-Burns
Hudson Sandler (PR Adviser to Burst)
Nick Lyon +44 20 7796 4133
Key terms of the Acquisition
Burst is incorporated in the State of Maryland in the USA. The
Acquisition will be consummated as a merger in accordance with
Maryland General Corporation Law ("MGCL"), as amended, and as such
the Acquisition is not subject to the City Code on Takeovers and
Mergers.
Pursuant to the Merger Agreement, for each Burst Share held:
-- Burst stockholders who are not Accredited Investors will
receive the Per Share Amount in cash;
-- Burst stockholders who are Accredited Investors will receive
0.248443 New Blinkx Shares; and
-- holders of vested in-the-money options over Burst Shares will
receive in cash per option the Per Share Amount less the exercise
price of such option,
such consideration together valuing the issued and to be issued
shares of common stock of Burst at US$30 million (GBP18.5
million).
The Per Share Amount represents a premium of approximately:
-- 402 per cent. to the mid market closing price of 5.0 pence
per Burst Share on 7 April 2011, being the last dealing day prior
to the date of this announcement; and
-- 339 per cent. to the average mid market closing price of 5.71
pence per Burst Share for the twelve month period up to the date of
this announcement.
As at the date of this announcement, Burst had 71,628,562 Burst
Shares in issue and admitted to trading on AIM and at the Closing
Date there will be 957,437 vested in-the-money options over Burst
Shares at the Per Share Amount. In addition, pursuant to an
agreement dated 6 April 2010 relating to Burst's acquisition of On
the Phone Media Limited ("OTP"), a total of 1,000,000 Burst Shares
will be issued and allotted to certain of the OTP vendors prior to
the Closing Date.
As at the date of this announcement, blinkx had 334,405,282
Blinkx Shares in issue. Assuming 85 per cent of the existing and to
be issued shares of Burst Shares are held by Accredited Investors,
blinkx will issue 15,374,715 New Blinkx Shares pursuant to the
Merger Agreement and such shares will, when issued, represent
approximately 4.4 per cent. of blinkx's enlarged issued share
capital.
The Acquisition is conditional, inter alia, upon receiving the
irrevocable and unconditional written consent from holders of at
least seventy five per cent. of the voting power of the existing
issued shares of Burst Shares within twenty four hours of the
signing of the Merger Agreement, and on the admission to trading on
AIM of the New Blinkx Shares.
On the basis of the currently envisaged timetable, and in order
to comply with US securities laws, completion of the Acquisition
will occur on 9 May 2011.
Cancellation of Burst's AIM Admission
Prior to (and conditional on) completion of the Acquisition,
Burst will give notice under Rule 41 of the AIM Rules for Companies
for the cancellation of the admission to trading of Burst Shares on
AIM.
Burst Media Corporation Overview
Burst, headquartered in Burlington, Massachusetts, USA, is an
online media and technology company founded in 1995. Burst is a
leading seller of vertically targeted audiences found in the long
tail of the internet. By working together with web publishers and
advertisers, the company sells the value of long tail content to
enable brands to reach highly segmented audiences in a
quality-assured environment. Through its media divisions Burst
Network, Burst Direct, Burst Media UK and Giant Realm, the company
represents a broad and deep offering of interest-based websites.
These networks focus on specialty content provision, 'verticals'
within the long tail of the internet, enabling improved
targeting.
In a separate announcement (the "Preliminary Results
Announcement"), Burst has today also announced its results for the
year ended 31 December 2010. In summary, for the twelve months
ended 31 December 2010, Burst has reported revenues of US$37.7
million (2009: US$31.4 million), gross profit of US$15.5 million
(2009: US$14.0 million), and adjusted EBITDA loss of US$1.4 million
(2009: adjusted EBITDA of US$0.6 million). As at 31 December 2010
gross assets were US$21.0 million and cash and cash equivalents
were US$0.4 million (2009: US$5.7 million).
More information on Burst, including the Preliminary Results
Announcement is available at www.burstmedia.com
The Burst Board's recommendation of the Acquisition
The Burst Board believes that not only are Burst stockholders
receiving an appropriate value for their Burst Shares but also that
the commercial rationale for the Acquisition is especially strong.
Those Burst stockholders that are eligible to receive New Blinkx
Shares will have the opportunity to participate as shareholders in
a larger, more liquid group with exciting plans to capitalise on
the growth in video and display advertising.
The Burst Board unanimously approved the Merger Agreement and
the Acquisition and recommends that Burst stockholders consent to
the adoption of the Merger Agreement.
The Burst Board retained Altium to provide it with a fairness
opinion in connection with the Acquisition. Altium has advised the
Burst Board that, as of the date of its opinion, based upon and
subject to the various conditions, considerations and assumptions
set forth in its opinion provided to the Burst Board, the
consideration to be received by Burst Shareholders is fair from a
financial point of view to such holders. In providing its advice to
the Burst Board, Altium has taken into account the commercial
assessments of the Burst Board.
Those members of the Burst Board who hold shares of Burst Shares
and their related family trusts, accounting for in aggregate
21,267,468 Burst Shares representing approximately 29.7 per cent of
the issued Burst Shares, have irrevocably consented to Burst
entering into the Merger Agreement.
Lock-Up Arrangements
In connection with the Acquisition, Jarvis Coffin, Chief
Executive Officer of Burst has agreed not to dispose of 1,942,559
New Blinkx Shares, equating to eighty per cent. of such New Blinkx
Shares to be issued to him, representing approximately 0.6 per
cent. of the Company's enlarged share capital, for a nine month
period from the Closing Date.
The total number of New Blinkx Shares subject to lock-up
arrangements and orderly market restrictions is 4,052,376
representing approximately 1.2 per cent. of the Company's enlarged
share capital.
Burst Management and Employees
blinkx has stated that it attaches great importance to the
skills and experience of the existing management and employees of
Burst. Following the completion of the Acquisition, the existing
contractual employment rights of Burst employees will be continued
on substantially similar terms.
Conditional upon the completion of the Acquisition, Steve Hill,
David Hanger, Jim Garrity, Brian Emsell, Tim Trotter and Felice
Kincannon, all current members of the Burst Board, will resign from
the Burst Board.
Burst Share Option Plans
Under the terms of the Merger Agreement, it is proposed that all
outstanding vested in-the-money Burst options be cancelled and
exchanged for the right to receive a cash payment in an amount
equal to the Per Share Amount less the cost of exercising each
option. It is also proposed that all outstanding unvested
in-the-money Burst options be cancelled and exchanged for the right
to receive options over Blinkx Shares.
Settlement Arrangements
The Acquisition provides for a total consideration of US$30
million (GBP18.5 million) to be satisfied by the issue of New
Blinkx Shares and cash. Burst stockholders who are Accredited
Investors (as finally determined by blinkx) will receive the Per
Share Amount in New Blinkx Shares. Burst stockholders who are not
Accredited Investors will receive the Per Share Amount for each
Burst Share in cash.
As soon as reasonably practicable following the Closing Date,
each person who is a Burst stockholder at the Closing Date will be
posted a Letter of Transmittal, which will contain instructions
with regards the actions to be taken to submit the certificates
which represented their Burst Shares at the Closing Date to the
Exchange Agent and to receive in return the relevant consideration
due to them pursuant to the Merger Agreement.
Settlement of the consideration due pursuant to the Merger
Agreement cannot take place until the return of the completed and
signed documentation.
Expected Timetable of Principal Events
Event Date
Record date for Stockholder consent 7 April 2011
Consent Notice Announcement 8 April 2011
Consent Notice sent to Burst Stockholders 8 April 2011
Admission of New Blinkx Shares 9 May 2011
Closing Date of the Acquisition 9 May 2011
Letter of Transmittal sent to Burst Stockholders 10 May 2011
blinkx Current Trading
As announced separately today, following good interim results,
trading for the second half of the financial year has continued to
be strong. blinkx expects to report revenues greater than US$65
million, an increase of over 90% from last year (ahead of analyst
expectations), and to report an operating profit above the current
analyst consensus estimates of US$6.7m (after share based
compensation charges) for the financial year ended 31 March 2011
before one-time costs associated with the Acquisition.
blinkx Overview
blinkx is the world's largest and most advanced video search
engine. Today, blinkx has indexed more than 35 million hours of
audio, video, viral and TV content, and made it fully searchable
and available on demand. blinkx's founders set out to solve a
significant challenge - as TV and user-generated content on the Web
explode, keyword-based search technologies only scratch the
surface. blinkx's patented search technologies listen to - and even
see - the Web, helping users enjoy a breadth and accuracy of search
results not available elsewhere. In addition, blinkx powers the
video search for many of the world's most frequented sites.
For the six months ended 30 September 2010, blinkx's revenues
rose 109% to US$27.4 million, driven by strong underlying growth in
the business. With operating expenses flat during the period, the
revenue growth translated into the group's first positive operating
profit of US$2.0 million and its first positive free cash flow of
US$1.4 million.
blinkx is based in San Francisco, USA and Cambridge, UK. More
information is available at www.blinkx.com.
Additional Information
This announcement is for information only and, save as expressly
set out herein, does not constitute an offer or invitation to
underwrite, subscribe for or otherwise acquire or dispose of any
securities or investment advice in any jurisdiction, including
without limitation, the United Kingdom, the United States,
Australia, Canada or Japan. Persons needing advice should consult
an independent financial adviser.
The distribution of this announcement and the issue and
allotment of the New Blinkx Shares as set out in this announcement
in certain jurisdictions may be restricted by law. No action has
been taken by blinkx or Canaccord that would permit an offering of
the New Blinkx Shares or possession or distribution of this
announcement or any other offering or publicity material relating
to the New Blinkx Shares in any jurisdiction where action for that
purpose is required. Persons into whose possession this
announcement comes are required by blinkx and Canaccord to inform
themselves about, and to observe, such restrictions. Any failure to
comply with these restrictions may constitute a violation of the
securities laws of any such jurisdiction.
Canaccord, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively
for blinkx and no one else in connection with the Acquisition and
will not be responsible to anyone other than blinkx for providing
protections afforded to clients of Canaccord.
Altium, which is authorised and regulated in the United Kingdom
by the Financial Services Authority, is acting exclusively for
Burst and no one else in connection with the Acquisition and will
not be responsible to anyone other than Burst for providing
protections afforded to clients of Altium.
Forward-looking Statements
This announcement contains (or may contain) certain
forward-looking statements with respect to blinkx's or Burst's
plans and its current goals and expectations relating to its future
financial condition and performance and which involve a number of
risks and uncertainties. blinkx and Burst caution readers that no
forward-looking statement is a guarantee of future performance and
that actual results could differ materially from those contained in
the forward-looking statements. These forward-looking statements
can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements sometimes
use words such as 'aim', 'anticipate', 'target', 'expect',
'estimate', 'intend', 'plan', 'goal', 'believe', or other words of
similar meaning. Examples of forward-looking statements include,
among others, statements regarding blinkx's or Burst's future
financial position, income growth, impairment charges, business
strategy, projected levels of growth in its markets, projected
costs, estimates of capital expenditure, and plans and objectives
for future operations of blinkx or Burst and other statements that
are not historical fact.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances,
including, but not limited to, UK domestic and global economic and
business conditions, the effects of continued volatility in credit
markets, market-related risks such as changes in interest rates and
exchange rates, the policies and actions of governmental and
regulatory authorities, changes in legislation, the further
development of standards and interpretations under International
Financial Reporting Standards ("IFRS") applicable to past, current
and future periods, evolving practices with regard to the
interpretation and application of standards under IFRS, the outcome
of pending and future litigation, the success of future
acquisitions and other strategic transactions and the impact of
competition - a number of which factors are beyond blinkx's or
Burst's control. As a result, blinkx's or Burst's actual future
results may differ materially from the plans, goals, and
expectations set forth in blinkx's or Burst's forward-looking
statements. Any forward-looking statements made herein by or on
behalf of blinkx or Burst speak only as of the date they are made.
Except as required by the FSA, AIM or applicable law, blinkx and
Burst expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements
contained in this announcement to reflect any changes in blinkx's
or Burst's expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is
based.
The price of shares and the income from them may go down as well
as up and investors may not get back the full amount invested on
disposal of the shares.
Neither the content of Burst's or blinkx's websites (or any
other website) nor the content of any website accessible from
hyperlinks on either of Burst or blinkx's websites (or any other
website) is incorporated into, or forms part of, this
announcement.
Responsibility Statements
Burst and the Directors of Burst accept responsibility for the
information contained in this document in so far as it relates to
matters concerning Burst. To the best of the knowledge and belief
of Burst and the Directors of Burst (who have taken all reasonable
care to ensure such is the case) the information contained in this
document for which they are taking responsibility is in accordance
with the facts and contains no omission likely to affect the import
of such information.
blinkx and the Directors of blinkx accept responsibility for the
information contained in this document in so far as it relates to
matters other than those concerning Burst. To the best of the
knowledge and belief of blinkx and the Directors of blinkx (who
have taken all reasonable care to ensure such is the case) the
information contained in this document for which they are taking
responsibility is in accordance with the facts and contains no
omission likely to affect the import of such information.
Appendix 1
Definitions
"Accredited Investors" (A) a U.S. Person that is an "accredited
investor" as such term is defined in Rule 501
promulgated under the Securities Act, or would
otherwise be excluded under Rule 501(e)(1) under
the Securities Act from any calculation of the
number of purchasers of New Blinkx Shares in the
Acquisition; (B) a non U.S. Person who is a
"qualified investor" within the meaning of
Article 2(1)(e) of the Prospectus Directive
and/or persons who are permitted to receive New
Blinkx Shares pursuant to an exemption from the
Prospectus Directive and other applicable
legislation; and (C) in the United Kingdom, a
non U.S. Person who is a qualified investor who
is: (i) an investment professional within the
meaning of Article 19(5) of the FPO; (ii) a high
net-worth company, unincorporated association
and other body within the meaning of Article 49
of the FPO; or (iii) a person to whom it is
otherwise lawful to issue New Blinkx Shares
provided, that blinkx shall have a sole and
absolute discretion to determine whether a
Stockholder is Accredited or Non-Accredited for
the purposes of the Merger Agreement;
=========================== =================================================
"Acquisition" has the meaning given to it in paragraph
1 of this Announcement;
=========================== =================================================
"Admission" admission to trading on AIM of the New Blinkx
Shares becoming effective in accordance with
the AIM Rules for Companies
=========================== =================================================
"AIM" the AIM market of the LSE;
=========================== =================================================
"Altium" Altium Capital Limited, Financial Adviser
to Burst
=========================== =================================================
"Banner" a form of internet advertising. This form of
online advertising entails embedding an
advertisement into a web page. It is intended to
attract traffic to a website by linking to the
website of the advertiser. The advertisement is
constructed from an image (GIF, JPEG, PNG),
JavaScript program or multimedia object
employing technologies such as Java, Shockwave
or Flash, often employing animation, sound, or
video to maximise presence. Images are usually
in a high-aspect ratio shape (i.e. either wide
and short, or tall and narrow);
=========================== =================================================
"Blinkx Share" an ordinary share of GBP0.01 in the capital
of the Company;
=========================== =================================================
"Burst Share" one share of Burst's common stock, par value
$0.01;
=========================== =================================================
"Canaccord" Canaccord Genuity Limited, Financial Adviser
to the Company;
=========================== =================================================
"Closing Date" the date on which the Acquisition closes,
such time and date to be specified by the
parties;
=========================== =================================================
"CPM" Cost Per Mille, the estimated cost to show
an advertisement to 1,000 viewers;
=========================== =================================================
"Exchange Agent" Capita Registrars of The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU;
=========================== =================================================
"FPO" the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005, as amended;
=========================== =================================================
"FSA" Financial Services Authority;
=========================== =================================================
"IFRS" International Financial Reporting Standards;
=========================== =================================================
"LSE" London Stock Exchange plc;
=========================== =================================================
"Merger Agreement" the Agreement and Plan of Merger, dated April
7, 2011, by and among the Company, Burst,
and Merger Sub;
=========================== =================================================
"Merger Sub" Burst Merger Company, a Maryland corporation
and wholly-owned subsidiary of the Company;
=========================== =================================================
"New Blinkx Shares" new ordinary shares of GBP0.01 each in the
capital of the Company;
=========================== =================================================
"Non-Accredited Investors" a Person who is not an Accredited Investor
=========================== =================================================
"OTP" On The Phone Media Limited;
=========================== =================================================
"Per Share Amount" US$0.4093 (25.08 pence) in cash per share
of Burst common stock;
=========================== =================================================
"Prospectus Directive" Directive 2003/71/EC; and
=========================== =================================================
"Stockholder" a holder of shares of Burst's common stock,
par value $0.01 per share or any holder of
shares of the stock of Merger Sub.
=========================== =================================================
US$ amounts in this announcement have been converted into GBP
Sterling at an exchange rate of US$1.6318 = GBP1, the rate
prevailing on 6 April 2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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