REG - Electric Guitar PLC - Acquisition of Mymyne Limited and notice of GM

Electric GuitarAnnouncement

09/08/2024 07:00

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RNS Number : 8145Z  Electric Guitar PLC  09 August 2024

This announcement contains inside information as stipulated under the UK
version of the Market Abuse Regulation No 596/2014 which is part of UK Law by
virtue of the European (Withdrawal) Act 2018, as amended. Upon publication of
this announcement this information is considered to be in the public domain.

 

9 August 2024

 

 

Electric Guitar PLC

("Electric Guitar" or the "Company")

 

Acquisition of Mymyne Limited

 

Issue of equity and notice of General Meeting

 

Appointment of Capital Markets Consultant

 

Change to total voting rights

 

 

The Board of Electric Guitar PLC (LSE: ELEG), the digital marketing and
advertising company providing first-party data solutions, is pleased to
announce that it has today agreed the next step in its buy and build strategy,
with the share-for-share acquisition of Mymyne Limited ("Mymyne"), a developer
of data-related software solutions, and provider of related sales and
marketing services (the "Acquisition"), to add new software capabilities as
well as achieving significant synergies and cost savings for Electric Guitar.

 

The Acquisition is subject to approval by Electric Guitar's shareholders for
the purposes of section 190 of the Companies Act 2006 (transactions with
directors) at a general meeting of the Company to be held on 27 August 2024 at
10.00 a.m. (the "GM"). A circular containing a notice convening the GM will be
posted to shareholders shortly and made available on the Company's website at
electricguitarplc.com (https://www.electricguitarplc.com/investors/) .

 

The Company also announces an operational update, the appointment of a capital
markets consultant and the issue of new ordinary shares of 0.5p in the Company
("Ordinary Shares") to certain professional advisers and consultants.

 

Background to Mymyne

 

Mymyne is a marketing technology business. It has developed data-related
software solutions alongside sales and marketing services for the digital
marketing sector. While its revenues have to date come from its sales and
marketing services, its intellectual property ("IP") includes a website for
collecting first-party data in exchange for discount vouchers; Situational
Targeting, a segmentation tool that can be used for both customer intent
analysis and programmatic digital advertising; and Peprr, a digital traffic
and website optimisation tool that offers independent web analytics and
channel attribution.

 

Based on unaudited management accounts for the year ended 29 February 2024,
Mymyne recognised revenue of £95,000 (2023: nil), an operating loss of
approximately £60,000 (2023: nil) and had net liabilities at 29 February 2024
of approximately £52,000 (2023: net assets of £59,000). Mymyne has one
employee as well as a number of consultants and contractors.

 

Mymyne was established in 2019 by John Regan (Electric Guitar's CEO) and other
digital marketing experts, with particular expertise in developing and
commercialising data-related software services.  John Regan was a director of
Mymyne until 1 July 2023 and was re-appointed as a director on 14 July 2024 in
order to satisfy certain provisions in Mymyne's articles of association in
relation to the Acquisition. John Hutchinson (Electric Guitar's Chair) has
also invested in Mymyne. Accordingly, as John Regan and his associates
currently hold approximately 31.2 per cent. of the issued share capital of
Mymyne and John Hutchinson holds approximately 9.2 per cent, they have recused
themselves from any dealings between Mymyne and Electric Guitar following the
IPO of Electric Guitar in January 2022, a position that has been maintained.
All dealings and negotiations by Electric Guitar with Mymyne have been handled
exclusively by Electric Guitar's directors that are independent of Mymyne (the
"Independent Directors").

 

Background to and reasons for the Acquisition

 

Prior to Electric Guitar's reverse takeover of 3radical Ltd ("3radical") on 3
May 2024 (the "RTO"), Mymyne had been engaged by 3radical to provide sales and
marketing services as a key component of 3radical's drive for growth following
a period of retrenchment and limited resources. That contract (the "3radical
Contract") provided 3radical with a dedicated sales and marketing team, with
pre-agreed phases of work from March 2024 to September 2024 and services to
continue monthly thereafter. The 3radical Contract is terminable on one
month's notice, such notice not to take effect earlier than 30 September 2024.
For sales and marketing services provided to 3radical up to the RTO, Mymyne
agreed to be paid in the form of 4,880,950 Ordinary Shares at 2.1p per share
(the price of all the Ordinary Shares issued at the time of the RTO) on
completion of the RTO (the "Mymyne Shareholding"), after which Mymyne was
contracted to be paid according to fixed monthly payments.

 

On 6 June 2024, the Company announced the appointment of Jeremy Saul as
Managing Director of 3radical. As Jeremy Saul had been a key employee of
Mymyne, the management of both companies determined that it would be more
efficient for Mymyne to be absorbed into Electric Guitar, bringing in-house
sales and marketing functions that had previously been outsourced to Mymyne by
3radical prior to the RTO, and generating substantial cost savings and
synergies compared to continuing the outsourced 3radical Contract. 3radical
has had the benefit of working with Mymyne and using its resources and network
for several months, and the Independent Directors believe that the Company
will benefit operationally and financially from the ownership of Mymyne and
its team rather than continuing the 3radical Contract.

 

In addition to the sales and marketing resources, the Acquisition brings
potentially valuable IP as outlined above. The Independent Directors have
assessed this IP and believe that it has potential value in the context of
Electric Guitar's overall business and strategy. However, as this potential
has yet to be realised, no value has been placed on it by the Independent
Directors in assessing the fairness of the agreed purchase consideration for
the Acquisition, even though approximately a fifth of the Consideration Shares
(as defined below) are conditional on the potential of this IP being realised
in the Company's current financial year to 31 March 2025.

 

Terms of the Acquisition

 

The consideration for the Acquisition is payable in two tranches worth up to a
maximum of approximately £154,000, based on yesterday's closing mid-market
price of Electric Guitar's Ordinary Shares of 0.73p (the "Issue Price"), to be
satisfied in full by the issue of up to a maximum of 21,026,186 new Ordinary
Shares (the "Consideration Shares"), being 9.4 per cent. of Electric Guitar's
current issued share capital.

 

In addition, Mymyne will seek to place the Mymyne Shareholding with investors
shortly after this announcement. This sum would be paid to Electric Guitar on
completion of the Acquisition.

 

The Consideration Shares are to be issued in two tranches as follows:

 

1)    9,834,521 new Ordinary Shares (the "Initial Consideration Shares")
are to be issued on completion of the Acquisition, representing 4.4 per cent.
of Electric Guitar's current issued share capital, valued at approximately
£72,000 based on the Issue Price; and

 

2)    the issue of the balance of the Consideration Shares, being
11,191,665 new Ordinary Shares (the "Deferred Consideration Shares"), is
deferred for a year and payable as follows:

 

(i)            6,714,999 new Ordinary Shares, worth approximately
£49,000 at the Issue Price, conditional on Jeremy Saul not then having left
3radical; and

 

(ii)           up to 4,476,666 further Ordinary Shares, worth up to
approximately £33,000 at the Issue Price, conditional on, and valued by
reference to, Mymyne's IP generating net revenues for 3radical in the year to
31 March 2025 of 2.5 times the value of this tranche of Deferred Consideration
Shares at the time of issue.

 

While the number of Consideration Shares for all tranches is fixed and the two
tranches of Deferred Consideration Shares are only payable subject to the
conditions set out above, should Electric Guitar's prevailing share price
increase to more than 2.4p per share at the time that any Deferred
Consideration Shares are due to be issued, the number of Deferred
Consideration Shares will be reduced accordingly so that the maximum potential
value of the two tranches of Deferred Consideration Shares at the time of
issue is no higher than £161,160 and £107,440 respectively, of which the
latter sales-related tranche would be self-financing if issued.

 

The £72,000 value of the Initial Consideration Shares represents
approximately £42,000 less than 3radical is in any event contracted to pay
Mymyne in cash for its services in the next two months. This saving is
irrespective of the significant cost savings and synergies expected to be
achieved when compared to continuing with Mymyne's services under the 3radical
Contract, as well as the potentially valuable IP.

 

Application will be made for the admission of the Initial Consideration Shares
to trading on AIM on or around 28 August 2024 ("Initial Consideration Shares
Admission"). Completion of the Acquisition is subject to approval by
shareholders of a resolution at the GM and Initial Consideration Shares
Admission. The Initial Consideration Shares will rank pari passu with the
Company's existing Ordinary Shares and will be issued utilising the share
authority granted to the directors of Electric Guitar at the general meeting
of the Company on 1 May 2024.

 

The vendors of Mymyne Limited, and who will therefore receive Consideration
Shares, are Tamsin Hunt, John Regan, Steven Kent, Ross Haworth, David
Stephenson, Neil Hathaway, Robert Regan, Jason Batten, Brian Basham, Julian
Berry (Marketing Planning Services Ltd), Jeremy Saul and John Hutchinson
(together, the "Vendors").

 

John Regan, Jason Batten and John Hutchinson have agreed not to dispose of any
Consideration Shares for a period of 12 months from their issue, and for six
months thereafter only to dispose of any Consideration Shares within orderly
market principles. The other Vendors have agreed to only sell any
Consideration Shares within orderly market principles for six months from
their issue.

 

Related party transaction

 

Since John Regan and John Hutchinson are directors of the Company and
shareholders in Mymyne, the Acquisition constitutes a related party
transaction pursuant to Rule 13 of the AIM Rules for Companies. Accordingly,
the Independent Directors consider, having consulted with the Company's
nominated adviser, Allenby Capital Limited, that the terms of the Acquisition
are fair and reasonable insofar as Electric Guitar's shareholders are
concerned.

 

Director shareholdings

 

Subject to the Acquisition being approved by Electric Guitar's shareholders at
the GM and Initial Consideration Shares Admission, as a result of the issue of
the Initial Consideration Shares, John Hutchinson and John Regan will have the
following interests in the enlarged share capital of the Company (as enlarged
by the issue of the Initial Consideration Shares, the Consultant Shares and
the Fee Shares):

 

                                                          On Initial Consideration Shares Admission
 Director         Number of Initial Consideration Shares  Number of Ordinary Shares held  Percentage of enlarged share capital
 John Hutchinson  908,059                                 6,495,339                       2.67%
 John Regan*      3,068,140                               12,088,520                      4.97%

 

*Includes 321,031 Initial Consideration Shares to be issued to John Regan's
wife, Tamsin Hunt.

 

General Meeting

 

Due to the size of the Acquisition and of the shareholdings of John Regan (and
his associates) and John Hutchinson in Mymyne, the Acquisition requires
shareholder approval pursuant to section 190 of the Companies Act 2006, which
pertains to transactions with directors.

 

A circular including a notice convening the GM (the "Circular"), to be held at
the offices of BDB Pitmans LLP, One Bartholomew Close, London, EC1A 7BL at
10.00 a.m. on 27 August 2024, is expected to be sent to shareholders later
today. At the GM, shareholders will be asked to consider the resolution
referred to above.

 

Electronic Communications

 

Pursuant to the Company's Articles of Association and for efficiency and cost
savings, the directors of Electric Guitar hereby notify its shareholders that
the Board wishes to implement communications with shareholders in electronic
form and take advantage of the provisions relating to website communications.

 

Under the Companies Act 2006, the Company is permitted to make arrangements to
communicate electronically with shareholders. The Company proposes to take
advantage of these arrangements in order to improve communication with
shareholders while reducing its use of paper. The proposed electronic
communications regime requires the Company to consult with its shareholders
individually as to whether they wish to receive information through the
Company's website. A consultation letter will be enclosed with the Circular in
this regard (the "Consultation Letter"). If a shareholder agrees, then future
communications with that shareholder will be by electronic means. If a
shareholder fails to respond to the Consultation Letter within 28 days, then
such a shareholder will be deemed to have agreed to receive communications by
electronic means. If a shareholder still wishes to receive future
communications in paper form, then such shareholder will need to respond to
the Consultation Letter within 28 days selecting the appropriate paper form
option. Shareholders who notify the Company that they no longer wish to
receive alerts by email, will instead receive written notifications.

 

The Company sees a positive benefit in the increase in electronic
communications, in terms of the saving of paper and production expense.

 

Operational Update

 

After acquiring 3radical in May and as anticipated in our AIM Admission
Document, we immediately set to work boosting 3radical's sales and marketing
activities in conjunction with Mymyne. In particular, we recruited a very
experienced new Managing Director for 3radical with extensive sales and
marketing experience in the sector; added direct sales, marketing and business
development resources in the UK; and made multiple business development trips
to major customers and prospects in APAC.

 

We are already seeing positive responses to our new sales approach, focusing
more on target markets and shortening sales lead times. A new website was
launched a month ago to showcase work, and improve our messaging, sales
support and lead generation. This has already resulted in significantly
improved visitor engagement rates. In addition, as expected at the time of the
3radical acquisition, we have completed the development of the Voco Solution
Portal ("VSP") as a minimum viable product, and are now actively marketing it.
VSP allows for much quicker and easier adoption of the Voco SaaS platform by
clients.

 

We have also signed new international collaborations. First with Digital
Alchemy (announced on 19 June 2024), a global marketing automation consultancy
based in APAC and North America, in particular strengthening our presence in
APAC through Digital Alchemy's robust technological partnerships with
Salesforce, Adobe, SAS, Braze and HCL. Pairing Voco with Digital Alchemy's
ability to implement and support hyper-personalisation strategies at scale,
Voco-generated data can inform Digital Alchemy's AI-powered decisioning engine
to deliver the right promotion or content to customers for stronger
relationships with their audiences and higher marketing ROI.

 

Our next new collaboration was a reseller agreement with Sophus3 (announced on
15 July 2024), a market leader in consumer engagement for the automotive
industry, working with brands including Ford, Hyundai and Volkswagen.
Sophus3's solutions analyse online car buyers to understand their habits,
influences and behaviours to help car makers engage with them better and
increase sales. Sophus3 has its own SaaS platform, Engage, that allows clients
to respond to consumer behaviour in real-time, and serve them the right
content at the right moment to maximise sales. Our agreement with Sophus3
means we can now not only offer Voco to some of the world's largest car brands
for whom first-party data is becoming increasingly important, but also resell
Sophus3's Engage platform to our clients and prospects in other industries, to
help them respond to their consumers' behaviour in real-time by providing
tailored content that boosts sales.

 

More recently, as announced on 31 July 2024, we entered into our Marcomms.ai
50:50 joint venture with Exelia Technologies, a Cyprus-based software
development business with a specialised team of developers proficient in
blockchain, machine learning, data processing and AI, to harness the
transformative potential of AI in the marketing communications and advertising
sector. Combining Exelia's technical capabilities in all forms of AI and data
transformation, with our sales and marketing expertise and, critically,
3radical's unique global dataset with over 1 billion data points, is allowing
the joint venture to create advanced machine learning algorithms to help
Electric Guitar's clients and prospects (and those of the businesses in our
acquisition pipeline) increase their consumer engagement, enabling them to
understand their audience at a new level. Work on Marcomms.ai's first product
has already begun, and we expect to start user acceptance testing with our key
clients and prospects in the autumn.

 

In addition to these trading developments, we are actively pursuing our
acquisition strategy following our first acquisition in May of 3radical. The
next step was successfully negotiating the proposed all-share acquisition
Mymyne, both bringing us additional IP to utilise alongside our other
products, and also in-housing much of our sales and marketing activity which
we expect will allow for significant synergies and cost-savings. We are
continuing to develop our acquisition pipeline and assessing opportunities,
and expect to announce further acquisitions in due course.

 

Appointment of Capital Markets Consultant, Related Party Transaction and issue
of shares

 

The Company also announces the appointment of Tanvier Malik as a Capital
Markets Consultant of the Company.

 

Mr Malik has long been the Company's most active adviser on engaging with the
capital markets and potential investors. His new consultancy agreement
formalises the basis on which he will continue to advise and assist the Board,
including reports on the state of the investor market; introducing potential
investors; dealing with the Company's brokers; and advice on public relations.
It also creates a contractual obligation for him to use neither this role nor
his shareholding in the Company to seek to interfere with the management of
the Company by its Board, which is wholly independent of him; and gives the
Company the option of reimbursing him for his services through the issue of
shares in lieu of fees.

 

Accordingly, the Company has issued 5,479,452 new Ordinary Shares (the
"Consultant Shares") at a price of 0.73 pence per Consultant Share (being
yesterday's closing mid-market price of Ordinary Shares) to Mr Malik to
satisfy his annual fee of £40,000.

 

Since Mr Malik controls Sanderson Capital Partners Limited which is a 20.99%
shareholder of the Company and personally has a holding of 3.72% of the
Company, pursuant to the AIM Rules for Companies, Mr Malik is deemed a related
party to the Company and therefore the issue of the Consultant Shares to Mr
Malik constitutes a related party transaction pursuant to Rule 13 of the AIM
Rules for Companies. Accordingly, the Directors consider, having consulted
with the Company's nominated adviser, Allenby Capital Limited, that the terms
of the transaction are fair and reasonable insofar as Electric Guitar's
shareholders are concerned.

 

In addition, certain professional advisers and consultants have agreed for
their fees to be satisfied by the issue to them of, in aggregate, 4,109,590
new Ordinary Shares (the "Fee Shares") at a price of 0.73 pence per Fee Share
(being yesterday's closing mid-market price of Ordinary Shares) to satisfy
their fees.

 

Application will be made for the admission of the Consultant Shares and Fee
Shares to trading on AIM, and dealings are expected to become effective on or
around 14 August 2024 ("Admission"). The Fee Shares will rank pari passu with
the Company's existing Ordinary Shares.

 

Total voting rights

 

On Admission, the Company will have 233,422,331 Ordinary Shares in issue with
each Ordinary Share carrying the right to one vote. There are no Ordinary
Shares currently held in treasury. The total number of voting rights in the
Company is therefore 233,422,331 and this figure may be used by shareholders
as the denominator for the calculations by which they will determine if they
are required to notify their interest in, or a change to their interest in,
the Company under the FCA's Disclosure Guidance and Transparency Rules.

 

Recommendation

 

The Independent Directors believe that the Acquisition is in the best
interests of shareholders and the Company as a whole and therefore recommend
that all shareholders vote in favour of the resolution at the GM, as they
intend to do in respect of their shareholdings in the Company, representing
2.08%. In addition, John Regan and John Hutchinson intend to vote in favour of
the resolution at the GM in respect of their interests in Ordinary Shares,
which represent 6.53%.

 

The Company has received irrevocable undertakings from shareholders of the
Company (including the Directors mentioned above), representing approximately
36.10 per cent. of the Company's current issued share capital, to vote in
favour of the resolution at the GM.

 

Richard Horwood, COO of Electric Guitar, commented: "Mymyne not only brings
Electric Guitar additional intellectual property, but also brings in-house key
sales and marketing functions that had previously been outsourced by 3radical,
and which we can now fully apply to the other digital marketing businesses we
will be acquiring as part of our buy and build strategy. Moreover, the deal
achieves cost savings that more than offset the value of the all-share
consideration, regardless of the other benefits of the acquisition."

 

Jason Batten, Managing Director of Mymyne, added: "Working with 3radical and
Electric Guitar has been an important part of our business, and this all-share
deal is a logical evolution, giving our shareholders the opportunity to
benefit directly from the success of the Electric Guitar group as it grows."

 

For further information:

 

 Electric Guitar PLC

Richard Horwood                                        07778 463 868

 Mymyne Limited

 Jason Batten                                           07866 423 501

 Allenby Capital (Nominated Adviser and Joint Broker)   020 3328 5656

 Jeremy Porter

 Piers Shimwell

 Dan Dearden-Williams

 Axis Capital Markets (Joint Broker)                    020 3026 0320

 Richard Hutchison

 Global Investment Strategy UK (Joint Broker)           020 7048 9400

 James Sheehan

 Yellow Jersey (Financial PR)

 Charles Goodwin                                        020 3004 9512

 Annabelle Wills                                        electric@yellowjerseypr.com

                           (https://appriver3651008983.sharepoint.com/sites/CompanyData/Shared%20Documents/Corporate%20Finance/Mandated%20Transactions/Electric%20Guitar/Announcements/electric@yellowjerseypr.com)
 Bessie Elliot

 

Notes to Editors

 

Electric Guitar PLC (AIM: ELEG) is the provider of first-party data solutions
for the marketing and advertising industry, empowering businesses to realise
the value of their first-party data. In an era of changing consumer attitudes
towards the use of their data, tighter privacy legislation, and the demise of
third-party cookies, first-party data is now the key to success in digital
marketing. Electric Guitar's strategy is to acquire and scale businesses that
help marketers maximise the value of first-party data by curating, managing,
and deploying it, and in doing so making Electric Guitar the industry standard
for first-party data solutions. As the first part of this strategy, Electric
Guitar acquired 3radical Limited, a company that utilises its Software as a
Service platform, 3radical Voco, to enable organisations to engage individuals
and request their data directly using interactive digital experiences. It has
since entered into collaborations with several other businesses operating in
the field, as well as a joint venture with Exelia Technologies Limited called
Marcomms.ai for producing AI-driven products and services for the digital
marketing and advertising industry.

For further information please visit www.electricguitarplc.com
(http://www.electricguitarplc.com) .

About Mymyne

 

Run by Jason Batten, a serial entrepreneur and veteran in database-focused
marketing solutions, Mymyne Limited was established in 2019 to develop and
commercialising data-related software services, and evolved to provide sales
and marketing services to digital marketing solutions businesses such as
3radical. Its intellectual property includes, a website which collects
first-party data in exchange for discount vouchers; Situational Targeting, a
segmentation tool that can be used for both customer intent analysis and
programmatic digital advertising; and Peprr, a digital traffic and website
optimisation tool that offers independent web analytics and channel
attribution. Mymyne has also provided commercial due diligence services,
utilising the expertise of its network of specialist data-related marketing
experts.

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