REG - YouGov PLC - YouGov to acquire GfK’s Consumer Panel Business

YouGovAnnouncement

06/07/2023 17:30

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RNS Number : 2588F  YouGov PLC  06 July 2023

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR
CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY
PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN
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CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF YOUGOV PLC. PLEASE SEE
THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF
THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED ("MAR").

 

06 July 2023

YouGov plc

("YouGov" or "the Group" or "the Company")

 

YouGov to acquire GfK's Consumer Panel Business

 

Extends YouGov's Offering with Established Leader in European Household FMCG
Consumer Insights

Accelerating our strategic vision outlined at the Capital Markets Day

Delivering mid-teens EPS accretion in the first full year of ownership

 

YouGov plc (AIM: YOU) ("YouGov"), the international market research and data
analytics group, today announces the acquisition of the Consumer Panel
Business of GfK SE (the "Consumer Panel Business") for a headline purchase
price of €315 million (the "Acquisition").

 

GfK's Consumer Panel Business is an established leader in household purchase
data, with panels across 16 European countries, consisting of over 100,000
households. The Consumer Panel Business extends the Company's offering into
the FMCG sector, with its high intensity users of market research, and
provides an opportunity to significantly enhance the Group's offering to US
clients. The Consumer Panel Business will strengthen the Group's customer
value proposition and add highly engaged panellists in Europe, complementary
capabilities, and longstanding relationships with blue chip clients, helping
to accelerate the Group's strategic vision outlined at the YouGov Capital
Markets Day on 17 May 2023.

 

YouGov will fund the Acquisition through an equity placing of new ordinary
shares expected to raise gross proceeds of approximately £55 million
(representing approximately 4.9% of YouGov's issued share capital), with the
remainder of the cash consideration financed by a fully committed bridge debt
facility and existing cash on balance sheet. The terms of the placing were
announced separately today.

 

The Acquisition is subject to customary closing conditions including any
necessary regulatory approvals and works' council consultations in certain
jurisdictions. Completion is expected in the second half of 2023.

 

 Compelling Strategic and Financial Rationale
 ·             Extends YouGov's offering into the FMCG sector: The Consumer Panel Business
               brings longstanding relationships with a complementary blue-chip client base
               in the FMCG sector in which YouGov has, to date, been underpenetrated.
 ·             Adds highly-engaged panellists in Europe: GfK's Consumer Panel Business offers
               over 100,000 highly-engaged panellists and rich data assets on consumer
               household purchases. The Consumer Panel Business has a presence in 16
               countries in core continental Europe producing household purchase data
               representing over 50% of European GDP and over 145 million consumer
               households.
 ·             Enhances YouGov's customer value proposition: Opportunity to provide a
               holistic 360-degree view of the consumer by connecting data from the Consumer
               Panel Business with YouGov's profiling, media consumption and brand data.
 ·             Opportunity to significantly enhance YouGov's US offering: The Acquisition
               presents an exciting opportunity to bring the Consumer Panel Business offering
               to the US using YouGov Plus panels and adding expertise in building SKU data
               product and barcode catalogue, creation and maintenance of household samples,
               and specialist data science to enhance insights.
 ·             Resilient through-cycle financial profile, growing recurring revenue share(1)
               and expanding YouGov's operating profit margins(2): The Consumer Panel
               Business contributes a resilient financial profile to the Group, with average
               contract length of 3 years, 99% average gross revenue retention(3) within its
               largest segment, and approximately 66% of revenues from recurring subscription
               business(4). The Acquisition is also expected to enhance YouGov's operating
               profit margin(2).
 ·             Acquisition is mid-teens EPS accretive: The Acquisition is expected to result
               in mid-teens EPS accretion in the first full year of ownership
               pre-synergies(5). Additional upside potential is provided by currently
               identified annual cost synergies of approximately £4 million(6), further
               potential cost synergy realization during integration, and attractive revenue
               synergies from cross-sell, upsell and the US expansion opportunity.
 ·             Strong Cultural Alignment: YouGov sees strong cultural alignment between the
               two organisations given the Consumer Panel Business' rigorous approach to
               data, their use of data from highly-engaged panels, and their deployment of
               technology to deliver rich data and insights.

 

 Consideration, Background to the Offer, and Timeline to Completion
 ·             YouGov plc has agreed to acquire the Consumer Panel Business of GfK SE in an
               all-cash transaction for a headline purchase price of €315 million.
 ·                                                       Implies a sub-10x multiple on a trailing FY2022 EBITDA basis pre-synergies.
 ·                                                       The headline purchase price is subject to adjustments to reflect a cash-free
                                                         debt-free transaction, and assuming a normalised level of working capital. The
                                                         adjustments are to be finalised using a completion accounts mechanism. Based
                                                         on the current estimate of completion adjustments, the final cash
                                                         consideration is expected to be lower than the headline purchase price.
 ·             The opportunity to acquire the Consumer Panel Business has arisen because the
               European Commission has required its divestment to an independent third party
               as a clearance condition for the merger of NielsenIQ and GfK SE announced in
               July 2022.
 ·                                                       A transitional services agreement will remain in place for 12 months following
                                                         completion of the Acquisition with an option to extend by an additional 6
                                                         months on two occasions (maximum 24 months) to ensure a smooth separation and
                                                         integration process.
 ·                                                       Consumer Panel Business management will remain with the business to drive the
                                                         integration and continued success of the business.
 ·             The Acquisition is subject to customary closing conditions including any
               necessary regulatory approvals and works' council consultations in certain
               jurisdictions. Completion is expected in the second half of 2023.
 ·             In the year to 31 December 2022, the Consumer Panel Business generated
               revenues of €134 million and adjusted profit before tax of €24 million and
               as of 31 March 2023 had gross assets of €53 million(7).
 Financing & Capital Structure
 ·             YouGov will fund the Acquisition with a non-pre-emptive underwritten equity
               placing of new ordinary shares expected to raise gross proceeds of
               approximately £55 million (representing approximately 4.9% of YouGov's issued
               share capital), with the remainder of the cash consideration financed by a
               fully committed bridge debt facility and cash on balance sheet. The terms of
               the placing were announced separately today.
 ·             The Company expects net leverage at completion below 2x(8), with the strong
               combined cash flow profile de-levering by approximately 0.5x per annum.
 ·             The Company's progressive dividend policy is expected to remain unchanged
               following the Acquisition.

 

Morgan Stanley is acting as lead financial adviser to YouGov in relation to
the transaction with Numis acting as NOMAD. Citigroup is acting as debt
provider and financial adviser to YouGov. DLA Piper is acting as legal adviser
and KPMG is providing tax and structuring advice.

 

Stephan Shakespeare, YouGov Chief Executive Officer and Non-Executive Chair
Designate, commented:

 

"We are delighted to be acquiring one of the leaders in European household
purchase data and to be welcoming their employees into the YouGov fold. The
business' approach to data collection and their geographic coverage are highly
complementary to YouGov and we are fortunate to have been in a position to
make this Acquisition, which brings exciting future growth opportunities.

 

This transaction is important for us strategically, extending our offering
further into the under-penetrated FMCG sector, bringing with it long-standing
relationships with a blue-chip client base. We are excited by the future
potential of this combination, as it provides us with the opportunity to
super-charge our customer value proposition by combining one of the richest
data sets on household purchases with YouGov's existing media consumption and
brand data.

 

We believe this transaction will support YouGov's stated ambition of becoming
the world's #1 market research company."

Alex McIntosh, YouGov Chief Finance Officer, commented:

 

"We are thrilled to have the compelling opportunity to acquire such a
high-quality asset and YouGov's strong financial position has made it possible
for us to be agile during the assessment and transaction process.

 

Throughout this process we have worked closely with the Consumer Panel
Business management team and have been very impressed with the foundation they
have built. It is clear the management team share our ethos of using high
quality panels and technology to provide data rich insights to their
customers. We are looking forward to working with them over the coming months
to develop detailed integration plans and achieve our shared vision of scaling
their offering over the next few years under the YouGov Group."

 

Lars Nordmark, Interim CEO and CFO GfK, commented:

 

"With YouGov, we firmly believe we have found the perfect future owner for
GfK's Consumer Panel Business and a solution in the best interests of all
parties involved - especially for our clients and employees."

 

Enquiries

 

 YouGov plc

 Stephan Shakespeare / Alex McIntosh / Hannah Jethwani          +44 (0) 20 7012 6000

 Morgan Stanley (Lead Financial Advisor)

 Laurence Hopkins / Dominique Cahu / Conrad Griffin             +44 (0) 20 7425 8000

 Numis Securities (NOMAD and Joint Broker)

 Nick Westlake / Iqra Amin                                      +44 (0) 20 7260 1000

 Berenberg (Joint Broker)

 Mark Whitmore / Richard Andrews / Alix Mecklenburg-Solodkoff   +44 (0) 20 3207 7800

 FTI Consulting

 Charles Palmer / Emma Hall                                                         +44 (0) 20 3727 1000

 

 

About YouGov

YouGov is an international online research data and analytics technology
group.

 

Our mission is to offer unparalleled insight into what the world thinks.

 

Our innovative solutions help the world's most recognised brands, media owners
and agencies to plan, activate and track their marketing activities better.

 

With operations in the UK, the Americas, Europe, the Middle East, India, and
Asia Pacific, we have one of the world's largest research networks.

 

At the core of our platform is an ever-growing source of consumer data that
has been amassed over our twenty years of operation. We call it Living Data.
All of our products and services draw upon this detailed understanding of our
24+ million registered individuals to deliver accurate, actionable consumer
insights.

 

As innovators and pioneers of online market research, we have a strong
reputation as a trusted source of accurate data and insights. Testament to
this, YouGov data is regularly referenced by the global press, and we are the
most quoted market research source in the world.

 

Important notices

The person responsible for arranging for the release of this announcement on
behalf of YouGov is Alex McIntosh (CFO).

This Announcement is for information only and does not itself constitute or
form part of an offer to sell or issue or the solicitation of an offer to buy
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not constitute an offer to sell or issue or the solicitation of an offer to
buy, subscribe for or otherwise acquire securities in any jurisdiction. Any
failure to comply with this restriction may constitute a violation of the
securities laws of such jurisdictions.

No offering document or prospectus will be made available in any jurisdiction
in connection with the matters contained or referred to in this Announcement
and no such offering document or prospectus is required (in accordance with
the EU Prospectus Regulation or UK Prospectus Regulation) to be published.

Certain statements in this announcement are forward-looking statements,
including with respect to YouGov's expectations, intentions and projections
regarding its future performance, strategic initiatives, anticipated events or
trends and other matters that are not historical facts and which are, by their
nature, inherently predictive, speculative and involve risks and uncertainty
because they relate to events and depend on circumstances that may or may not
occur in the future. All statements that address expectations or projections
about the future, including statements about operating performance, strategic
initiatives, objectives, market position, industry trends, general economic
conditions, expected expenditures, expected cost savings and financial results
are forward‐looking statements. Any statements contained in this
announcement that are not statements of historical fact are, or may be deemed
to be, forward‐looking statements. These forward-looking statements, which
may use words such as "aim", "anticipate", "believe", "could", "intend",
"estimate", "expect", "may", "plan", "project" or words or terms of similar
meaning or the negative thereof, are not guarantees of future performance and
are subject to known and unknown risks and uncertainties. There are a number
of factors including, but not limited to, commercial, operational, economic,
and financial factors, that could cause actual results, financial condition,
performance or achievements to differ materially from those expressed or
implied by these forward-looking statements. Many of these risks and
uncertainties relate to factors that are beyond YouGov's ability to control or
estimate precisely, such as changes in taxation or fiscal policy, future
market conditions, currency fluctuations, the behaviour of other market
participants, the actions of governments or governmental regulators, or other
risk factors, such as changes in the political, social and regulatory
framework in which YouGov operates or in economic or technological trends or
conditions, including inflation, recession and consumer confidence, on a
global, regional or national basis. Given those risks and uncertainties,
readers are cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements speak only as of the date of this
announcement. YouGov and its affiliates, and any of its or their respective
directors, officers, partners, employees, advisers, or agents
(collectively, "Representatives") expressly disclaim any obligation or
undertaking to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise unless
required to do so by applicable law or regulation.

In particular, no statement in this announcement is intended to be a profit
forecast or profit estimate and no statement of a financial metric (including
estimates of EBITDA, profit before tax, free cash flow or net debt) should be
interpreted to mean that any financial metric for the current or future
financial years would necessarily match or exceed the historical published
position of YouGov and its subsidiaries. The acquisition of the Consumer Panel
Business by YouGov is structured as a carve out transaction. There is no
standalone audited financial information available relating to the Consumer
Panel Business. YouGov's assessment of the financial performance of the
Consumer Panel Business and of the prospective target margins is based upon
unaudited financial information and projections provided by GfK combined with
YouGov's management assessment of the expected financial performance of the
Consumer Panel Business. The position may be subject to change.  Certain
statements in this announcement may contain estimates. The estimates set out
in this announcement have been prepared based on numerous assumptions and
forecasts, some of which are outside of YouGov's influence and/or control, and
is therefore inherently uncertain and there can be no guarantee or assurance
that it will be correct. The estimates have not been audited, reviewed,
verified or subject to any procedures by YouGov's auditors. Undue reliance
should not be placed on them and there can be no guarantee or assurance that
they will be correct.

This announcement is being issued by and is the sole responsibility of YouGov.
No representation or warranty, express or implied, is or will be made as to,
or in relation to, and no responsibility or liability is or will be accepted
by or on behalf of YouGov (apart from the responsibilities or liabilities that
may be imposed by the Financial Services and Markets Act 2000, as amended or
the regulatory regime established thereunder) or by its affiliates or any of
its Representatives as to, or in relation to, the accuracy, adequacy, fairness
or completeness of this announcement or any other written or oral information
made available to or publicly available to any interested party or its
advisers or any other statement made or purported to be made by or on behalf
of YouGov or any of its affiliates or any of its Representatives in connection
with YouGov and any responsibility and liability whether arising in tort,
contract or otherwise therefore is expressly disclaimed.

Morgan Stanley & Co. International plc ("Morgan Stanley"), which is
authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority in the
United Kingdom, is acting exclusively as financial adviser to YouGov and no
one else in connection with the Acquisition. In connection with such matters,
Morgan Stanley, its affiliates and their respective directors, officers,
employees and agents will not regard any other person as their client, nor
will they be responsible to anyone other than YouGov for providing the
protections afforded to clients of Morgan Stanley nor for providing advice in
connection with the Acquisition, the contents of this announcement or any
matter referred to herein.

Numis Securities Limited ("Numis"), which is authorised and regulated in the
United Kingdom by the FCA, is acting exclusively for YouGov and no one else in
connection with the Acquisition and will not be responsible to anyone other
than YouGov for providing the protections afforded to clients of Numis nor for
providing advice in relation to the Acquisition or any other matter referred
to herein. Neither Numis nor any of its group undertakings or affiliates owes
or accepts any duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Numis in connection with the Acquisition or any
matter referred to herein.

Citigroup Global Markets Limited ("Citi"), which is authorised by the
Prudential Regulation Authority and regulated in the UK by the Financial
Conduct Authority and the Prudential Regulation Authority, is acting
exclusively for YouGov and for no one else in connection with the Acquisition
and will not be responsible to anyone other than YouGov for providing the
protections afforded to clients of Citi nor for providing advice in connection
with the Acquisition, or any other matters referred to in this announcement.
Neither Citi nor any of its affiliates, directors or employees owes or accepts
any duty, liability or responsibility whatsoever (whether direct or indirect,
consequential, whether in contract, in tort, in delict, under statute or
otherwise) to any person who is not a client of Citi in connection with this
announcement, any statement contained herein, the Acquisition or otherwise.

 1    Revenue derived from multi-year contracts and one-year contracts expected to
      renew.
 (2)  YouGov financials based on audited published financial information for the
      12-month period ended 31 July 2022, GfK financials based on management
      estimates and calendarized to July-YE. Pro-Forma numbers are calculated based
      on these standalone figures. The FY2022 operating profit margin for YouGov
      increases from 16.4% to 17.8% on a pro forma basis.
 (3)  Gross revenue retention measures how much of the monthly recurring revenue is
      retained each month after subtracting the effects of churn or downgrades to
      lower-priced products, but not the effects of upgrades.
 (4)  Revenue derived from multi-year contracts and one-year contracts expected to
      renew.
 (5)  EPS accretion calculated using the pro-forma financials based on standalone
      financials of YouGov (based on analyst consensus) and calendarized financials
      of GfK CPB based on management estimates.
 (6)  Based on YouGov management estimates.
 (7)  Financial information is based on unaudited financial information provided in
      relation to the Consumer Panel Business which has been assessed by and on
      behalf of YouGov.
 (8)  Net leverage calculated by dividing proforma net debt by Adjusted EBITDA
      (YouGov values based on analyst consensus (July-YE), including related
      acquisition financing, and Consumer Panel Business values based on management
      estimate calendarized to July-YE).

 

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