SimplyBiz Group PLC Conditional Acquisition of Defaqto Limited for a total consideration of £74.3 million

SimplyBiz Group Plc

SimplyBiz Group plc (LON: SBIZ), the leading independent provider of compliance and business services to financial advisers and financial institutions in the UK, announced today that it has conditionally agreed to acquire the entire issued share capital of Regulus Topco Limited, owner of Defaqto, a leading financial services technology business, for a total consideration of £74.3 million. On completion, Defaqto will have £3.4 million in cash on its balance sheet.

Acquisition highlights

· Defaqto is a leading financial services technology business operating a fintech platform for 8,500 advisers and providing independent ratings of 21,000 financial products and funds, licensed by 230 brands.

· Defaqto has developed a proprietary, scalable and flexible IT platform and infrastructure, supporting the largest database of financial products in Europe and providing unique information and insights to aid consumer and adviser purchase decisions.

· The combination of SimpyBiz and Defaqto creates a single fintech and support services group, which will benefit from an increased number and range of distribution channels.

· Defaqto will help the Group to advance its services into the General Insurance and Banking markets as it looks to expand its offering. Similarly, SimplyBiz will offer Defaqto access to its knowledge and experience of the advisory and asset management markets.

· A leading consumer brand with 70% recognition, Defaqto is a highly cash generative business built on a regulatory and capital light model; in 2018, generating revenues of £12.8 million and adjusted EBITDA of £5.3 million. Adjusted EBITDA margin in 2018 was 41%.

· The Acquisition is expected to be earnings enhancing (before synergies) during the first twelve months of ownership, as well as to provide significant strategic benefits.

· The Acquisition includes the purchase of £3.4 million of cash on Defaqto’s balance sheet at completion.

· Defaqto management have agreed to receive 50% of their vendor equity consideration in SimplyBiz shares, which are subject to a 12 month hard lock in, with a further 12 month orderly market provision. They will hold, in aggregate, 4.3% of the enlarged issued share capital of the Group.

Acquisition financing

· The Company intends to finance the Total Consideration for the Acquisition and associated expenses of £2.9 million through:

o a conditional placing of new ordinary shares in the capital of the Company with institutional and other investors to raise £13.8 million (the “Primary Placing”);

o the issue of new Ordinary Shares to the value of £15.3 million to certain of the vendors which will then be conditionally placed with institutional and other investors;
o the issue of new Ordinary Shares to the value of £7.5 million to certain of the Vendors;

o approximately £37.5 million of borrowings from new bank facilities; and

o the balance of approximately £3.1 million from the Company’s current cash resources.

· Post-Acquisition leverage is expected to be c.2.3x net debt to enlarged Group adjusted EBITDA (before share based payments) and expect this to be below 2x by 31 December 2019 due to the Group’s high level of cash conversion.

· The Acquisition is conditional, inter alia, upon admission of the new Ordinary Shares to be issued under the Institutional Placing and the Consideration Shares to trading on AIM (“Admission”).

Institutional Placing highlights

· The Institutional Placing has conditionally raised £29.1 million, comprising a £13.8 million Primary Placing and a £15.3 million Vendor Placing.

· The Placing Shares were conditionally subscribed for at, and the Consideration Shares were conditionally issued at, a price of 180 pence per Ordinary Share, representing a discount of 6% to the closing mid-market price of the Ordinary Shares on 19 March 2019.

· The Placing Shares will comprise 16.7% of the enlarged issued share capital.

· The conditional Institutional Placing was conducted jointly by Zeus Capital Limited and Peel Hunt LLP (together the “Joint Bookrunners”).

· The Institutional Placing is conditional, inter alia, upon Admission.

· Together, the Placing Shares and Consideration Shares will comprise 21.0% of the enlarged issued share capital.

Neil Stevens & Matt Timmins, Joint CEOs of The SimplyBiz Group, commented:

“We are delighted to announce the successful acquisition of Defaqto, which will play an important role in building on the Group’s strong momentum and enabling us to unlock a wide range of additional growth opportunities.

“The combination of the largest provider of outsourced regulatory and business support to the retail financial services market, with one of the leading providers of financial information and technology, will create a market leading platform across Retail Financial Services. Collectively the two businesses will work to enhance our proposition to the Banking and General Insurance sectors whilst continuing to invest in the leading fintech platform.

“Having long respected the Defaqto management team, we also recognise not just the strong strategic fit of the business, but also its cultural alignment. Defaqto is a business built upon industry leading talent and we look forward to working with our new colleagues as we continue to enhance services to financial intermediaries and product providers, and deliver value for shareholders.”

Zahid Bilgrami, CEO of Defaqto commented:

“We are absolutely delighted with SimplyBiz’s decision to acquire Defaqto. It opens an exciting new chapter in our development as a leading financial information business, and we look forward to the many opportunities that being part of a larger Group will present.

“While it will enable us to continue operating in an independent and autonomous manner, it will also carry many advantages of being a part of a listed entity. It will enable us to develop new technology faster, and thus continue to develop market-leading products for our clients at a time of vast technological change in the Financial Services sector.”

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