Digital Globe Services, Ltd. Acquires Education Business Unit

Posted: 1st November 2013 08:52

Digital Globe Services, Ltd. (AIM: DGS), a leading provider of online customer acquisition solutions for large, consumer-facing organisations, is pleased to announce the acquisition of the Actions Business Unit of San Francisco, US-based Ampush Media, Inc. (the "Education Business Unit" or "EBU"), for a maximum consideration of USD 3.8 million (the "Acquisition").  The acquisition is expected to be earnings enhancing for DGS in the first full year of ownership.

Founded in 2009, EBU has a strong track record of pay-for-performance lead generation in the education industry in the United States using paid search, call centres and social media advertising. EBU boasts an impressive customer portfolio and proprietary education lead generation IP that will be integrated into company-wide operations. DGS believes that combining its dgSMART platform and processes to the EBU business will result in higher quality lead generation to the education industry. DGS intends to apply its dgSMART platform to the lead generation activities of EBU and leverage its operating efficiencies including offshore technical development and contact centres to generate paid-for customer leads in a manner that is both cost-effective to DGS Edu's clients and profitable for DGS. As part of the transaction, Digital Globe Services, Inc. ("DGS Inc.") will enter into a commercial services contract with Ampush permitting DGS Inc. to offer lead generation to its existing client base through social media channels such as Facebook.
DGS Inc. has formed a new, wholly-owned, indirect subsidiary DGS Edu, LLC ("DGS Edu") and will continue to operate the company from its existing base in San Francisco. DGS expects that certain employees will transfer over from the Education Business Unit to DGS Edu, along with the business contracts and trade of the EBU.
EBU Financials

Based on analysis of the EBU's unaudited management accounts provided to DGS by Ampush, DGS estimates that the EBU has underlying annualised pro forma EBITDA of approximately $0.4 million.  This data has been based on the trailing 6 month period which DGS believes most accurately reflects the historic performance of the EBU and its operation as a separate entity. 

The consideration payable will be satisfied through an initial consideration of USD 1.5 million in cash and up to USD 1.0 million in shares, from the issue of up to 266,678 new depositary interests over common shares in the Company (the "Consideration Shares"), issued on a trailing 30 day average of DGS closing share price as counted from the thirty days prior to closing the transaction. 
The share consideration will be paid in two tranches, with 50% paid immediately and 50% to be paid in approximately March 2014 contingent on certain minimum revenue targets being met in the three months after closing. DGS retains the right to substitute cash for the second tranche of Consideration Shares, at the prevailing market price for those shares.   Each tranche of Consideration Shares will be subject to a 90-day lock-up following the release of the shares to the sellers and a further orderly market arrangement.
In addition, a further deferred cash consideration of up to USD 1.2 million subject to certain revenue targets being met over the 12 months after the 31 October 2013 closing of the transaction.  If the earn-out is met, DGS anticipates paying in December 2014 or January 2015. There is an additional commercial services agreement for DGS Inc. to leverage Ampush AMP 2.0 Marketing Platform for social media advertising services in exchange for fees in the amount of $100,000 cash paid up front and usable over the succeeding seven months period. 
As of the date of this announcement and following the issue of the first tranche of DGS Edu Consideration Shares, the Company's issued share capital consists of 29,800,294 common shares with a nominal value of $0.001 each and each carrying one voting right (the 'Common Shares'). The figure of 29,800,294 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FSA's Disclosure and Transparency Rules. Application will shortly be made for the admission of the first tranche of Consideration Shares to be admitted to trading on AIM, which is expected to take place on 7 November 2013.
Jeff Cox, CEO of Digital Globe Services, commented: "We are delighted to complete our first acquisition since DGS joined AIM in February 2013.  This is a financially attractive, tuck-in acquisition that complements our organic growth strategies and accelerates our entrance into the education lead generation market in North America.  DGS looks forward to integrating EBU and the EBU team into the Group."
Jesse Pujji, Co-Founder and CEO of Ampush stated: "The sale of EBU opens the opportunity for Ampush and the DGS Group to continue working together to ensure client success in lead generation and customer acquisition across not just the Education Sector, but DGS partners as well. At the same time, Ampush can grow its investment in its software platform for its core, mobile-first native social advertising and maintain focus on this core business opportunity.  We are excited to have found in DGS a partner who can help enable our vision." 

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