Sorrell’s S4 Capital gains first Australian foothold with MightyHive purchase
Sir Martin Sorrell’s S4 Capital will get its first Australian outpost with the acquisition of programmatic platform MightyHive, which was confirmed overnight.
The impending announcement was leaked on the service’s website ahead of the formal announcement and put to end a month of media speculation which resulted in S4 Capital confirming that it was in talks to acquire MightyHive.
The privately held San Francisco based programmatic service with offices in Sydney and Singapore has an estimated value of between US$140m-$200m on revenues of around $25m a year according to the Financial Times.
In order to fund the acquisition, S4 will be raising £74m in share placements.
The acquisition is the second step in Sorrell’s aim to build S4 into what he has called a “new age/new era digital marketing services” based upon “a global digital content platform; first-party data fuelling both digital media planning and creative ideas too; and, finally, digital media buying.”
In July, S4 purchased Dutch production house Media Monks following an A$536m bid.
The company is also on the lookout for acquisitions in the Asia-Pacific region with recently appointed APAC CEO, Michel de Rijk, telling Mumbrella Asia the company was looking “to acquire companies in the content, digital media planning and buying and first party data space. This can be global or regional operating businesses.”
Sorrell has repeatedly denied S4 Capital is being established as a competitor to WPP Group, the company he built into a global powerhouse over 33 years before being deposed in April.
The announcement of the acquisition is below:
S4 CAPITAL PLC
(“S4 Capital” or the “Company”)
Merger with MightyHive, Inc.
Firm Placing and Placing and Open Offer of 67,272,727 New Ordinary Shares
and
Notice of General Meeting
S4 Capital plc (SFOR.L), the new age/new era digital advertising and marketing services company, announces an important second strategic step, that it has reached agreement to merge with MightyHive, Inc., a market-leading programmatic solutions provider for future thinking marketers and agencies, for an enterprise value of US$150 million.
The Company also announces the appointments of Victor Knaap, Wesley ter Haar and Peter Rademaker as directors of the Company with immediate effect, and the appointment of Peter Kim and Christopher Martin, the CEO and COO of MightyHive respectively, as directors of the Company conditionally on and with effect from Admission. Daniel Pinto, founder and CEO of Stanhope Capital, the global investment and advisory group, which is leading the capital raising, will also join the Board at that time.
Merger highlights
- Furthers S4 Capital’s strategy of aligning award-winning digital creative content, digital media planning and buying and first-party data capabilities.
- MightyHive has a strong growth record, with revenue increasing from 2015 to the year ended 31 December 2017 at a CAGR of approximately 129 per cent. and Adjusted EBITDA increasing at a CAGR of 196 per cent. in the same period.
- The MightyHive Merger is expected to be significantly accretive to earnings per share in the first full financial year following completion.
- Programmatic advertising spend is experiencing significant growth and MightyHive is well-positioned to capitalize on the digital transformation and disruption of marketing.
- MightyHive shareowners (management and people) will receive their consideration 50 per cent. in cash and 50 per cent. in New Ordinary Shares. New Ordinary Shares issued as consideration for the MightyHive Merger will be Restricted for a period of two years from Admission.
- MightyHive’s third-party investors, which represent approximately 21 per cent. of the equity, will receive their consideration 100 per cent. in cash.
- S4 Capital will establish an incentive scheme with an aggregate value of US$5 million for MightyHive’s people and it will pay US$5 million in restricted cash bonuses to MightyHive’s people following completion of the MightyHive Merger out of the existing cash resources of the Group.
S4 Capital will fund the cash portion of the consideration through the issue of 67,272,727 New Ordinary Shares at a price of 110 pence per New Ordinary Share by way of a firm placing to raise £28.1 million and a placing and open offer to raise £45.9 million.
This new capital raising is led by the Stanhope Entrepreneurs Fund (“Stanhope”), a growth-capital fund managed by Stanhope Capital, the global investment and advisory group. Stanhope will be a long term strategic partner for S4 Capital and Daniel Pinto, Stanhope Capital’s founder and CEO, will join the Company’s Board upon Admission.
Sir Martin Sorrell, Victor Knaap and Wesley ter Haar (in respect of their personal holding companies), Peter Rademaker, Daniel Pinto and the EBT have given irrevocable undertakings not to take up their respective Open Offer Entitlements which, in aggregate amount to 16,113,694 Open Offer Shares (the “Available Shares”).
Pursuant to a placing letter between Dowgate (as agent of the Company) and Stanhope, Stanhope has agreed to subscribe 8,431,342 Firm Placed Shares, 16,113,694 Available Shares and 3,227,711 Placing Shares. The Available Shares allocated to Stanhope in connection with the Placing will not be subject to clawback in the Open Offer and will not be available to be taken up by other Placees in the Placing. Any Open Offer Shares not taken up in the Open Offer (“Excess Shares”) will be available to be allocated at the discretion of HSBC and Dowgate to Stanhope and other Placees in the Placing. All the New Ordinary Shares subscribed by Stanhope in the Issue will be Restricted for two years from Admission.
HSBC and Dowgate have made arrangements to place the Firm Placing Shares with Stanhope and other Firm Placees, and to place the Placing Shares with Stanhope and other Placees.
Further information on the MightyHive Merger and the Issue is set out in the Prospectus which the Company expects to publish today.
The Shareowner authority required to issue New Ordinary Shares in connection with the MightyHive Merger will be sought from Shareowners at a General Meeting of the Company on 20 December 2018, notice of which is set out in the Circular that will be sent to Shareowners later today. Irrevocable undertakings to vote in favour of the resolutions to be proposed at the General Meeting have been received from 8 Shareowners representing 39.60 per cent. of the issued Ordinary Shares of the Company.
It is expected that Admission of the New Ordinary Shares and completion of the MightyHive Merger will take place on 24 December 2018.
Sir Martin Sorrell, Executive Chairman of the Group, commented:
“The merger with MightyHive marks an important second strategic step for S4 Capital. The peanut has now morphed into a coconut, and is growing and ripening. MediaMonks’ award-winning digital creative production and MightyHive’s market-leading programmatic offering will give S4 Capital’s clients end-to-end, fully integrated and seamless capabilities in purely digital marketing. Following both the MightyHive merger and the recent opening of the MediaMonks office in San Francisco, S4 Capital’s focus on the West Coast of the United States and the digital natives at companies like Apple, Microsoft, Google and Facebook, not forgetting the software giants Adobe, Salesforce and Oracle, will intensify.
“S4 Capital intends to provide global, multi-national, regional, local clients and influencer-driven millennial brands with new age/new era digital marketing services concentrated in three key areas initially – the development of a global digital content platform; first-party data fuelling both digital media planning and creative ideas; and, finally, digital media buying. Clients of all kinds want these services delivered faster, better and cheaper, by more agile and responsive organisations, either in-house, co-located with them or alone. To this end, S4 Capital will be organised primarily on a unitary basis, with key people continuing to be incentivised through significant, equity ownership in the enterprise as a whole. S4 Capital believes that this strategy and structure will deliver significant long-term value for share owners, particularly through organic growth, supported by strategically-focussed acquisitions.
Stanhope Capital’s strategic investment is an excellent validation of our long term strategy and we welcome the input of our new directors Victor, Wes, Pete, Chris, Peter and Daniel on the Board, to complement that of Paul, Rupert and Sue.”
Who do I send the invoice to for the subbing?
2nd last para, I’m sure it’ll jump off the page – …denied S3 Capital…
User ID not verified.
Small typo in the second to last paragraph, calling the company “S3” 🙂
User ID not verified.
Thanks Pendant and Stuart, I’ve fixed that typo.
Let the mark-ups ensue
User ID not verified.
Significant price paid, if true, for a run-of-the-mill Google marketing platform reseller and support centre with 3 offices.
User ID not verified.
I love it.
Please tell me the typo in the name was deliberate. Or have you just been hanging around a while?
User ID not verified.