Press release – 27 October 2022.
Merit Group plc (AIM: MRIT), the data and intelligence business, announces that it has agreed to sell the Media, Events and Training operations of its Dods Political Engagement business (together, the “MET Operations”) to Political Holdings Limited, a private company owned by Lord Ashcroft KCMG PC, for a cash consideration of £4.5 million (the “Disposal”).
In the year ending 31 March 2022, the MET Operations generated revenue of £9.3 million and an adjusted EBITDA of approximately £0.5 million, with net assets of £0.5 million as at 31 March 2022.
Merit expects the Disposal to complete in the current calendar year. The Disposal remains subject to the satisfaction of certain conditions, including satisfaction of financing by Political Holdings Limited. Following completion the Group will use the net proceeds(1) to pay down its net debt(2), which as at 30 September 2022 was £3.2m, and to fund the growth plans of its ongoing business intelligence operations.
(1) Net proceeds comprise £4.5m consideration, to be adjusted for normalised working capital, less transaction costs
(2) Net debt/net cash comprises the aggregate of gross debt, excluding IFRS16 lease liabilities and cash and cash equivalents
Background to and reasons for the Disposal
Following the Group’s change of name and new strategic focus announced in March 2021, and having conducted an internal review of its operations, the Board of Merit concluded earlier this year that the Group was overly diverse and complex given its market size and that it needed to focus its future strategy on its core data and intelligence offerings. These core operations comprise; the market leading Dods Political Intelligence service with over 800 subscribers in the UK and Europe, which generated £6.9 million of subscription revenue in the last financial year; and the data and intelligence business of Merit Data & Technology which generated £10.7 million, the significant majority of which is recurring revenue.
The Board of Merit believes focussing on business intelligence will allow it to grow its core business operations and improve returns to shareholders.
Political Holdings Limited owns three companies in the media sector, focused on politics and government: Biteback Publishing (Britain’s leading political publisher), Campaigns & Elections (the non-partisan go-to resource for political campaign professionals in the USA and Mexico), and ConservativeHome (the UK’s premier independent conservative news and analysis site). Merit believes that its MET Operations will benefit from the focus that will come from being part of a company specialising in media and events.
David Beck, CEO of Merit Group plc, said:
“This is an important step for Merit. The Disposal will allow us to focus on the parts of the Group with recurring or subscription revenue, attractive margins and strong cash generation. Following the Disposal we will become fully focussed on the business intelligence sector.
“This transaction, together with the disposal of our minority stake in Social 360 announced in July, will mean we have raised £5m from the disposal of non core assets. When set against our market capitalisation of approximately £8.5m these are obviously significant strategic developments.”
Related Party Transaction
Political Holdings Limited is owned by Lord Ashcroft KCMG PC, a substantial shareholder in the Company as defined by the AIM Rules. Further, Angela Entwistle, a non-executive director of the Company, is a director of Political Holdings Limited.
The Disposal therefore constitutes a related party transaction under Rule 13 of the AIM Rules. The Independent Directors of the Company (being all Directors save for Angela Entwistle) consider, having consulted with Canaccord Genuity Limited in its capacity as the Company’s nominated adviser for the purposes of the AIM Rules, the terms of the Disposal to be fair and reasonable insofar as the Company’s shareholders are concerned.
About Merit’s Media, Events and Training Operations
Included in the MET Operations in the Disposal are the leading political news website Politics Home and magazines such as The House, Holyrood and The Parliament as well as the online publication Civil Service World. Under the Dods brand the Company runs events such as its Diversity & Inclusion Series that includes Women into Leadership events; in Scotland the annual Holyrood Garden Party and Political Awards and in Brussels the MEP Awards. The Company also runs events for others, notably Government Departments including Civil Service Live and the CS Awards. Dods Training runs training courses for civil servants as well as NGOs and commercial organisations.
