Lo-Q plc Acquisition of accesso LLC

Posted: 5th December 2012 10:15

Lo-Q (AIM: LOQ), the AIM listed provider of virtual queuing systems for theme parks, water parks and major attractions, is pleased to announce the acquisition of accesso LLC ("accesso") ("Acquisition"): the leading provider of ticketing solutions for theme parks, water parks, zoos and cultural attractions in North America.
Acquisition Key Points
The Directors believe that accesso will:
  • Deepen Lo-Q's customer relationships, particularly with important 'top 10' theme and water park operators;
  • Enhance Lo-Q's ability to develop new products and value-added services for customers, particularly in mobile, by combining both companies' strong IP and product development skills;
  • Strengthen Lo-Q's management team, with accesso's current CEO, Steven Brown, joining the Lo-Q board with immediate effect and becoming Chief Operating Officer of the merged North American business and other key staff remaining with the enlarged Group in key management positions;
  • Be immediately earnings accretive;
  • Enable Lo-Q to cross-sell accesso's solutions to customers and prospects in Europe and Asia;
  • Accelerate Lo-Q's existing growth strategy by opening up new complementary verticals;
  • Help to reduce the seasonality currently inherent in Lo-Q's business.
Commenting on the Acquisition, Tom Burnet, Chief Executive of Lo-Q said:
"I am delighted to announce the news today of our acquisition of accesso.  Both parties believe that this combination presents an excellent opportunity to build a trusted, proven and energetic supplier of scale across multiple Leisure markets. accesso's customer base complements our own and our products and technologies will be hugely synergistic. Bringing these two businesses together will expand the opportunity for both of us globally and we firmly believe that the deal is an excellent use of Lo-Q's cash, as we seek to grow the size, scope and potential of our firm. This is a very exciting day for the entire Lo-Q team."
Commenting on the Acquisition, Steven K. Brown, Chief Executive Officer of accesso, said:
"We're thrilled to be joining the Lo-Q portfolio and look forward to offering our combined set of revenue-driving resources to attractions around the globe. Blending our unique and highly successful companies will allow us to jointly leverage the talent of both teams and our combined technological, mobile and operations expertise to develop next generation solutions to meet the rapidly changing needs of the attractions marketplace."

Rationale for Acquisition
The Directors of Lo-Q believe that the combination of accesso's platform, products, customer base and skilled employees with Lo-Q's existing operations and customer relationships will open up new routes to growth for the enlarged group as well as defend and deepen existing client relationships. As such, the Board believes that this acquisition represents an excellent and appropriate use of Company cash, supporting its potential to deliver future growth from a broader, more balanced mix of end-markets.
accesso is recognised as the attractions industry's leading provider of ticketing solutions offering a range of proprietary PCI Level 1, fully-hosted ticketing, ecommerce, mobile and payment processing solutions to more than 100 leading venues across the United States, Canada and Mexico. accesso is on track to process nearly $1 billion in transactions in 2012 and deliver more than 14 million print-at-home and mobile admission tickets for its clients.
accesso's strong customer base is highly complementary to Lo-Q's, with both companies sharing some of the theme park and water park industry's largest operators as customers. Similar to Lo-Q, accesso has a strong track record of customer growth and customer retention and the acquisition will add a number of new 'top 10' worldwide operator names to Lo-Q's existing relationships.  In addition, accesso currently operates only in North and Central America, which presents the Enlarged Group with an opportunity to leverage Lo-Q's existing presence in Europe and its partnership in Asia to expand sales of accesso's products internationally.
accesso's product suite represents an important strategic bridgehead for Lo-Q into adjacent Leisure verticals, such as zoos and cultural attractions.  These relationships and products will support Lo-Q's stated ambition to move in to new verticals, expanding the range of opportunities open to the Company. It will also help to broaden and deepen Lo-Q's potential market in areas that see less 'seasonal' revenue flows, thereby reducing, over time, the seasonality Lo-Q's business currently demonstrates. Furthermore, the addition of accesso's highly experienced management team which includes extensive expertise in the theme park and attractions market to the Company's existing employee base will support and enhance Lo-Q's continued expansion into the Leisure market.
Both organisations believe that the industry trend of convergence to mobile based solutions - with payment, ticketing, queue-line management and privilege and content - will become intrinsic to delivering a great guest experience.  By combining accesso's existing mobile product and its sales track-record in this area with Lo-Q's increasingly successful Smartphone-based solution, the Directors believe that Lo-Q will be better able to exploit the growth that this trend is enabling.
For example, accesso's comprehensive mobile content and secure commerce platform will reach more than 1.1 million downloads in 2012.  accesso has demonstrated a strong track record in exploiting its market-leading position to acquire clients that want a mobile presence.  Then, by demonstrating the strength of its customer support and solutions, accesso has in turn successfully upsold to those customers its ticketing system.  This strategy has worked well, resulting in a mobile client base of 36 venues since the programme's inception two years ago.
Board Appointment
Upon completion of the Acquisition, Steven Brown will become Chief Operating Officer of the merged North American business and will join the Lo-Q board with immediate effect. Steven Brown, aged 44, President and Chief Executive Officer of accesso, spent 16 years with the Walt Disney Co. where he held executive positions as Director of Walt Disney World Ticketing and Vice President of Revenue Management for Disneyland Resort. He has also worked as Corporate Vice President of Ticket Strategy and Sales for Six Flags. Further details in connection with Steven Brown's appointment, which are required under the AIM Rules, are included below.
Terms of the Acquisition
Under the terms of the Acquisition, Lo-Q will purchase 100% of the equity in accesso for a total consideration of $22.0m (£13.7m). This consideration consists of the following: $6,337,500 (c.£4.0m) in cash at completion; the issue of 1,802,246 new ordinary shares ("New Ordinary Shares") in Lo-Q (equating to approximately 9.3 per cent of the enlarged issued share capital) (the "Initial Stock Consideration"); and a loan note from accesso for $6,337,500 (c.£4.0m) ("Loan Note") which attracts a coupon of 1.25% per annum until 31 March 2013 and 2.5% per annum from 1 April 2013. The Loan Note is convertible into Ordinary Shares of the Company from 1 April 2013 at nil cost and has a redemption date of 31 March 2014. The Company is in discussion with a number of banks with the intention of re-financing this loan note. The New Ordinary Shares making up the Initial Stock Consideration were issued at a price of £3.2265 with an exchange rate of 1GBP to 1USD of 1.6036.
Application has been made for the admission of 1,802,246 New Ordinary Shares, being the Initial Stock Consideration, to trading on AIM. It is expected that dealings in these New Ordinary Shares, which will rank pari passu in all respects with the existing ordinary shares of the Company, will commence on 10 December 2012. Following the issue of the New Ordinary Shares, the issued share capital of the Company will comprise 19,331,206 ordinary shares.
Steven Brown, who owned 100% of the equity in accesso, is the sole recipient of the Initial Stock Consideration. Following completion Steven Brown will transfer 78,330 Ordinary Shares of the Initial Stock Consideration to members of the current management team of accesso, 50% of which will be subject to lock-up restrictions for 12 months following completion with the next 25% and the final 25% subject to lock-up restrictions for 24 and 36 months following completion respectively. A further 483,176 Ordinary Shares of the Initial Stock Consideration will be subject to lock-up restrictions for 36 months following completion. Of the remaining 1,240,740 Ordinary Shares of the Initial Stock Consideration, 50% will be subject to lock-up restrictions for 12 months following completion with the next 25% and the final 25% subject to lock-up restrictions for 24 and 36 months following completion respectively.

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