REG - Public Policy Hldg - Acquisition of MultiState Associates

Public Policy HoldingAnnouncement

01/03/2023 07:01

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RNS Number : 4086R  Public Policy Holding Company, Inc.  01 March 2023

 1 March 2023

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via a Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.

 

Public Policy Holding Company, Inc.

 

("PPHC" or the "Group")

Acquisition of MultiState Associates

 

Acquisition broadens PPHC's footprint into all 50 US States

 

Strong trading momentum with growing client demand for the Group's expertise
and integrated capabilities

 

Public Policy Holding Company (AIM: PPHC), the US-based government relations
and public affairs group providing clients with a fully integrated and
comprehensive range of services including government and public relations,
research and digital campaigns, announces the acquisition of MultiState
Associates, Inc. ("MultiState"), one of the largest US-based state and local
government relations specialists, for an initial consideration of $22
million (the "Acquisition"). The Acquisition will be substantially and
immediately accretive to the Group's underlying earnings.

 

MultiState is a leading provider of state-based government relations
services, state issues tracking and compliance solutions. Founded in 1984 and
located in Virginia, the firm represents some of the world's best-known
organisations on issues of local, state and national importance.

 

Acquisition highlights

·    PPHC's second significant acquisition since IPO in December 2021.

·    The Acquisition is in line with the Group's inorganic growth strategy
and broadens its offering into state-level advocacy and public relations,
offering clients comprehensive policy solutions across jurisdictions.

·    MultiState's services are highly complementary to PPHC's with its
strength in research and compliance adding to and enhancing PPHC's broader
client offering.

·    As a wholly-owned subsidiary of PPHC, MultiState will retain its
distinct brand identity and its long-standing management team and staff.

·    The initial consideration of $22 million was funded 80% ($17.6
million) in cash and 20% ($4.4 million) through the issue of new common shares
in PPHC to the owners of MultiState (the "New Common Shares").

·    The Group has separately announced today that it has entered into a
$17 million credit facility, which has partially been deployed alongside
balance sheet cash to fund the cash element of the initial consideration.

·    Further earnout payments are contingent on MultiState achieving
profit growth targets between 2022 and 2027, promoting alignment with the
Group's growth objectives.

·    The Acquisition will be substantially and immediately accretive to
underlying earnings per share in 2023.

·    Significant revenue and profit synergy potential via the referral of
existing clients from the PPHC network.

 

Overview of MultiState

·    MultiState operates in all 50 US states and across Canada, servicing
over 300 corporate clients, in line with the PPHC's client profile, including
several Fortune 500 constituents.

·    Operations are well diversified with low client concentration - the
largest client represents c.5% of revenues and the top 30 clients account for
c.45%.

·    Total of 77 employees largely based out of Alexandria, Virginia.
Senior executives include Joseph Crosby (CEO), Edward Griesmer (President),
Jeffery Hartgen (Chairman), Maureen Riehl (General Counsel) and Joseph Rinzel
(Principal).

·    MultiState achieved a revenue CAGR of 10% from 2018 to 2021,
reporting net revenue of $12.8 million for the year ended 31 December 2021.
Profit before tax amounted to $3.5 million, after adjusting for PPHC's
remuneration policy.

 

Key terms of the Acquisition

·    The initial consideration of $22 million was satisfied on
completion, which occurred on 1 March 2023, in part by the issuance of
2,740,717 New Common Shares of $0.001 each at a price of £1.3378 per
Common Share, totaling $4.4 million, and the balance of $17.6 million paid in
cash.

·    Shares issued to the selling entity will be subject to a three-year
vesting period, and all 13 key principals will additionally be subject to
certain restrictive covenants. The initial cash consideration of $17.6
million was funded from a combination of PPHC's existing cash resources
and a credit facility entered into, and announced today, with Bank of America.

·    As part of the purchase consideration, in addition to the initial
consideration, three future payments could be made with the final payment
taking place after the end of 2027. These payments are contingent on
MultiState delivering profit growth targets between 2022 and 2027. Such future
payments will be paid 50% in PPHC shares and 50% in cash.

·    Including the initial consideration of $22 million, the aggregate
consideration is maximised at $70 million. This maximum would be achieved if
MultiState was to realise more than 25% compound annual profit growth through
to 2027.

·    Net assets of MultiState transferred at completion amount to $3.0
million. 

 

PPHC trading update

·    The Group's strong trading momentum continued into the second half of
2022 with growing client demand for the Group's expertise and integrated
capabilities.

·    While still subject to audit, revenues for 2022 are expected to be
approximately $109 million. This implies a c.10% increase versus 2021 and c.7%
organic growth.

·    Underlying EBITDA margin is expected to be in line with management's
expectations.

·    As a result, the Group expects to propose a final dividend in line
with its stated policy of distributing up to 70% of profit after tax. This
will be payable following publication of the Group's preliminary results for
the financial year ended 31 December 2022.

·    The Group has continued to make further progress and is confident
that the outcome of the mid-term elections, government spending programmes
ramping up, and the increasing importance of state legislation will support
ongoing growth in 2023.

 

Issue of New Common Shares

As part of the consideration payable upon completion, 2,740,717 New Common
Shares of $0.001 each are to be issued. An application will be made for
the New Common Shares, which will rank pari passu with the existing Common
Shares in issue, to be admitted to trading on AIM. Dealings are expected to
commence on or around 6 March 2023.

 

Following this issue of shares, the Group's total issued and voting share
capital upon admission will consist of 112,017,621 Common Shares. 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, securities of the Group.

 

Investor Presentation

PPHC will host a presentation via the Investor Meet Company platform on
Wednesday, 8 March 2023 at 12:30 (GMT). The presentation will enable existing
and prospective investors the opportunity to listen to management discuss the
Acquisition, PPHC's operations, growth strategy, and recent financials as
provided in this announcement.

 

Stewart Hall, CEO of PPHC, commented:

"The acquisition of MultiState fits perfectly with our strategy of broadening
our geographic footprint into key US state capitals and metropolitan areas,
while extending our offering by adding key service capabilities in research
and compliance. MultiState has a talented team and its strategic capabilities
will solidify PPHC's leadership position as the largest and most comprehensive
public policy firm in the US. Linking our well-established businesses in
Washington DC, Sacramento, California and Boston, Massachusetts to
MultiState's network in 50 states makes the Group uniquely suited to support
corporate clients in the most complex risks and opportunities they face.

 

"Our growth in the resilient and fragmented $17+bn US strategic
communications market is driven by increased inter-connectedness of federal,
state and international policies and risk exposure. I am confident that our
combined businesses will benefit greatly from new capabilities, new
geographies and new client opportunities."

 

Joseph Crosby, CEO of MultiState, commented:

"PPHC is bringing together highly specialised government relations businesses
at a scale that's never been seen. This Acquisition marks a significant
milestone during MultiState's 40(th) year in business as well as for each of
my talented partners and colleagues. It also marks a milestone for our
clients and the industry, as federal and state policy issues are evermore
interdependent and require the professionalism and seamless integration that
only PPHC and MultiState now offer."

 

Seale & Associates, Inc advised Multistate on the transaction.

 

Enquiries

 Public Policy Holding Company Inc.                                 +1 (202) 688 0020

 Stewart Hall, CEO

 Bill Chess, CFO

 Thomas Gensemer, Chief Strategy Officer & Investor Relations

 Roel Smits, Deputy CFO

  
 Stifel (Nominated Adviser & Broker)                                +44 (0)20 7710 7600

 Fred Walsh, Tom Marsh
 Buchanan Communications (Media Enquiries)                          +44 (0)20 7466 5000

 Chris Lane, Toto Berger                                            pphc@buchanan.uk.com (mailto:pphc@buchanan.uk.com)

 

About PPHC

Incorporated in 2014, PPHC is a US-based government relations and public
affairs group providing clients with a fully integrated and comprehensive
range of services including government and public relations, research and
digital campaigns. Retained by over two-thirds of its +700 clients, including
corporates, trade associations and non-governmental organisations, the Group
is active in all major sectors of the U.S. economy, including healthcare and
pharmaceuticals, financial services, energy, technology, telecoms and
transportation. PPHC's services support clients to enhance and defend their
reputations, advance policy goals, manage regulatory risk, and engage with US
federal and state-level policy makers, stakeholders, media and the public.

 

PPHC operates a holding company structure and currently has seven operating
entities comprising Crossroads Strategies, Forbes Tate Partners, Seven Letter,
O'Neill & Associates and Alpine Group Partners, KP Public Affairs, and
MultiState Associates. Operating in the strategic communications market, the
Group has a strong track record of organic and acquisitive growth, the latter
focused on enhancing its capabilities and to establish new verticals, either
within new geographies or new related offerings.

 

For more information, see www.pphcompany.com (http://www.pphcompany.com/) .

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