Current Report No. /2015 dated 3 June 2015
Conclusion of a significant agreement / Acquisition of assets with a significant value
General legal basis: Article 56 sec. 1 item 2 (a) of the Act dated 29 July 2005 on Public Offering, the Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies
Contents of the report:
The Management Board of Wirtualna Polska Holding S.A. (the “Company”) hereby announces that on this day, i.e. on 3 June 2015, the Company agreed the terms and conditions of a transaction and concluded with NextWeb Holdings S.a.r.l. with its registered seat in Luxembourg (the “Seller”) and Jakub Zieliński and Pamoja Capital Holdings (Lux 1) S.a.r.l. with its registered seat in Luxembourg (jointly the “Guarantors”) (the Company, the Seller and the Guarantors hereinafter jointly as the “Parties”) a share purchase agreement based on which the Company will acquire from the Seller 100 (one hundred) shares with a nominal value of PLN 500 (five hundred zloty) each in the share capital of NextWeb Media Sp. z o.o. with its registered seat in Warsaw and postal address Al. 3 Maja 12, Warsaw (“NextWeb Media”) (the “Shares”) (the “Share Purchase Agreement”). NextWeb Media holds 100% shares in the share capital of Blomedia.pl sp.z o.o. with its registered seat in Warsaw and postal address Al. 3 Maja 12, Warsaw (“Blomedia.pl”). The aggregate nominal value of the Shares is PLN 50,000 (fifty thousand zloty). The purchased Shares represent 100% of the share capital of NextWeb Media and carry the right to exercise 100% of the votes at the meeting of the shareholders of NextWeb Media.
NextWeb Media group is engaged in publishing and advertising based on its own unique content marketing, native advertising formats and big data technology. NextWeb Media group’s leading products are the services offered via the abcZdrowie.pl site, which is one of the most popular health-related websites in Poland, as well as Parenting.pl (which is a website for parents) and Blomedia.pl, which runs a content marketing platform that brings together a total of 600 blogs in the following categories: fashion, cooking, new technologies, motoring, travel, and parenting. The company’s services outreach is 4.6 million real users per month but if one includes the blogs affiliated with the Blomedia.pl, the estimated outreach is 5.5 million real users (Megapanel/PBI for March 2015).
The revenues of the NextWeb Media group, excluding the revenues from barter transactions (unaudited, according to PAS), in 2014 amounted to PLN 6,896 thousand, whereas in the first quarter of 2015 the revenues amounted to PLN 2,115 thousand and increased by 46% year on year.
The Share Purchase Agreement specifies the terms and conditions of the mutual settlements between the Company, the Seller and NextWeb Media (the “Settlements”). The rights attached to the Shares will be conveyed to the Company automatically upon the completion of the Settlements on the terms set out in the Share Purchase Agreement.
The price for the purchased Shares includes:
(i) PLN 19,418,979 (nineteen million, four hundred and eighteen thousand, nine hundred and seventy-nine zloty) payable on the execution date of the Share Purchase Agreement (the “Purchase Price”);
(ii) PLN 3,500,000 (three and a half million zloty) payable if NextWeb Media reaches the level of EBITDA specified in the Share Purchase Agreement for the period of the 12 months ended 30 June 2016 (the “Catch-Up Amount”);
(iii) PLN 1,300,000 (one million, three hundred thousand zloty) payable on the execution date of the Share Purchase Agreement on account of the Earn-out defined in section (v) letter (a) of this current report (“Earn-out 1 Advance Payment 1”);
(iv) PLN 500,000 (five hundred thousand zloty) payable on account of the Earn-out defined in section (v) letter (a) of this current report, if certain conditions, as specified in the Share Purchase Agreement, to the disbursement to the Seller of the Catch-Up Amount are met, together with that amount (“Earn-out 1 Advance Payment 2”);
(v) an earn-out equal to 15% of the increase in the value of (a) the business of the capital group of the Company in the healthcare, parenting and fitness/wellness segments, and certain ancillary activities, including the business currently run in the abovementioned scope by the Company’s capital group and NextWeb Media’s business acquired based on the Share Purchase Agreement and (b) the business of Blomedia.pl purchased based on the Share Purchase Agreement (the “Valuation”). The Valuation will be established for the periods of, respectively (a) the 12 months ended 31 December 2016 (“Earn-out 1”) reduced, as appropriate, by Advance Payment 1 towards Earn-out 1 and Advance Payment 2 towards Earn-out 1, and (b) the 12 months ended 30 June 2018 (“Earn-out 2”). As at the date of this current report, the estimated value of Earn-out 1, amounts to approximately PLN 6,400,000 (six million, four hundred thousand zloty), whereas the estimated value of Earn-out 2 amounts to approximately PLN 11,000,000 (eleven million zloty). The Management Board of the Company estimated the amounts of the Earn-outs based on the assumptions regarding the anticipated EBITDA target to be achieved by the aforementioned business in the indicated periods.
The Purchase Price will be adjusted by the difference between the projected net debt and the net debt existing as at the date of the conclusion of the Share Purchase Agreement, calculated pursuant to the conditions set forth in the Share Purchase Agreement (the “Purchase Price Adjustment”).
The Share Purchase Agreement sets forth, inter alia, the following contractual penalties:
(i) the Seller will pay to the Company, and the Company will pay to the Seller a contractual penalty of PLN 1,500,000 per each instance of a breach of the non-compete undertakings set out in the Share Purchase Agreement;
(ii) the Company will pay to the Seller a contractual penalty of PLN 1,500,000 per each instance of a breach of the ban on the creation and/or maintenance by the Company and members of the Company’s capital group of websites devoted to the subject of health and related issues until the adjusted Purchase Price has been fully paid.
If more than one contractual penalty could be charged for a single act of a Party, such Party shall pay the highest of the contractual penalties that could be charged for its act.
The aggregate amount of contractual penalties imposed on a Party cannot exceed the amount of the Purchase Price increased by the Catch-Up Amount, Purchase Price Adjustment, Earn Out 1 and/or Earn Out 2.
The payment of the contractual penalties set out in the Share Purchase Agreement does not preclude the entitlement to seek compensation for damage in excess of such penalties.
Other terms and conditions of the Share Purchase Agreement are standard terms customary for agreements of this type. The Share Purchase Agreement does not provide any conditions or deadlines.
Consequently, the transaction fits into the strategy of the Company that assumes investments in companies which provide services complementary to those of the Company’s capital group, and investing in products which complement the portfolio of the Company’s capital group.
The purchase of the Shares will be financed from the proceeds generated by the Company from the issue of ordinary bearer series E shares in the Company effected in the course of a public offering conducted based on a prospectus of the Company approved by the Polish Financial Supervision Authority on 10 April 2015.
There are no relationships between the Company and the individuals who manage and supervise the Company on one side and the Seller on the other side.
The criterion based on which the agreement was classified as a significant agreement and the Shares were classified as assets with a significant value:
The aggregate estimated value of the compensation which the Company will be required to pay for the purchased Shares in NextWeb Media will exceed 10% of the consolidated sales revenue of the Company’s capital group for the period of the last four financial quarters.
Legal basis: §5 section 1 subsection 1 and 3 in connection with §7 and 9 of the Regulation of the Minister of Finance of 19 February 2009 on current and periodic information provided by issuers of securities, and the conditions for recognising as equivalent information required by the laws of a non-member state.
Signatures of the individuals representing the Company:
Jacek Świderski – President of the Management Board
Elżbieta Bujniewicz–Belka – Member of the Management Board/CFO