Deals

LiteBulb Group Limited Proposed acquisition of Bluwstuff Limited

Posted: 28th January 2013 09:41
LiteBulb Group (AIM: LBB), the provider of innovative product solutions from identification through to retail distribution, announces that it has entered into a conditional share purchase agreement to acquire Bluwstuff Limited, a  global designer, manufacturer and distributor of award winning innovative products, predominantly for the gift and toy markets, for an initial consideration of 250,000,000 ordinary shares, with a further 125,000,000 ordinary shares dependent on various performance criteria (together, the "Consideration Shares").
 
About Bluwstuff Group ("Bluwstuff") - www.bluw.com

Bluwstuff has developed a diverse portfolio of its own brands and products that sell to major retailers in the UK, Europe and the US. Like LiteBulb Group, Bluwstuff is able to manage each step of the process of taking a product to market, from concept through to production, quality control and shipping to the Group's blue-chip retail clients and international distributors.
 
Bluwstuff has offices in the UK and in Hong Kong and has long-established relationships with a large number of blue-chip clients including Tesco, Boots, M&S, Sainsbury's, Next, WH Smith, Debenhams, Morrisons, Mothercare and Toys 'R' Us.
 
Bluwstuff has predominantly focused on developing its own intellectual property for the gifts and toy markets, fields in which it is recognised as a leading innovator. It has now proven its capability to use this platform to address a far wider range of retail channels.  Bluwstuff's executive team has worked with its Non-Executive Chairman, Jules Hydleman, former Chairman of Innocent Ltd. and CEO of Christy Group, to expand into new retail channels with its current customers. This will lead to a strong pipeline of new brands and products launching in the coming months. The board believes that the Company will benefit from the Bluwstuff executive team's continued involvement.
 
In the year ended 31 December 2011 Bluwstuff recorded turnover of £4.6 million and a loss before tax of £1.6 million.  Unaudited financials for Bluwstuff for the 11 months to November 2012 show revenues of £4.1m, and EBITDA loss of £2k, and the company is expected to record a positive EBITDA for the year ended 31 December 2012.
 
The acquisition is expected to significantly enhance sales over the next twelve months and be earnings enhancing before interest, tax, depreciation and amortisation.
 
Benefits of the acquisition

The acquisition is expected to provide a number of benefits to the enlarged group, these include:
  • creating a group with significantly higher turnover;
  • rapidly enhancing LiteBulb Group's position as a leading provider of niche innovative consumer brands and products;
  • significantly expanding LiteBulb Group's geographical presence and further drive global sales expansion through Bluwstuff's established presence in Hong Kong;
  • greatly expanding LiteBulb Group's portfolio of high quality brands and products, particularly within the areas of gifts and toys;
  • providing a multitude of cross-selling opportunities within LiteBulb Group's existing client base and the additional customer relationships established by Bluwstuff;
  • significantly bolstering existing relationships with mutual customers, increasing the range of products LiteBulb Group sells into these customers;
  • enabling the Company to more rapidly bring its pipeline of new products to market; and
  • providing material cost savings going forward.
 
Terms of the acquisition

LiteBulb Group entered into a sale and purchase agreement with the sellers of Bluwstuff Limited ("Agreement"). The sellers of Bluwstuff Limited are:  Carlos Investments S.A., Brit Investments S.A., Michael Aldridge, Charles Rudge, Spencer Holdings Limited, Brian Turner, Sir Rodney Aldridge, Parkdale Holdings Limited, Eldon Holdings Limited, Georgia Aldridge, Alan Rudge, ECF & M Limited and David Sayer.
 
The Agreement is conditional upon shareholder approval for the issue of the Consideration Shares, such condition to be satisfied by no later than 22 February 2013.
 
The Company has agreed to issue up to 375,000,000 Consideration Shares (representing 27.69 per cent of the enlarged issued share capital), with 250,000,000 of the Consideration Shares issued on completion and a further 125,000,000 of the Consideration Shares, subject to earn out arrangements based on certain sales and EBITDA targets.
 
The Agreement provides for upwards and downwards adjustments to the consideration depending on whether the net current assets of the Bluwstuff Group are more or less than nil.  Any upwards adjustment will be settled in ordinary shares of the Company and any downwards adjustment will be satisfied by the cancellation of Consideration Shares. 
 
The maximum number of new ordinary shares which may be issued to the sellers is such number which results in the sellers together being interested in no more that 29.9% of the issued share capital of the Company (as such capital is enlarged by the issue of Consideration Shares pursuant to the terms of the Agreement).
 
The sellers have given warranties and indemnities to the Company, customary for a transaction of this size and nature. The sellers have also agreed to lock-in and orderly market restrictions relating to the Consideration Shares.
 
Fundraising

LiteBulb Group also announces that it intends to raise expansion capital by the issue of up to £1,500,000 of secured Convertible Loan Notes ("Loan Notes"), in respect of which conditional subscription letters have been entered into by Henderson Volantis Capital and Novum Securities Limited for £1,100,000 in aggregate. The Loan Notes are redeemable three years from their issue and may be converted into ordinary shares at any time at 0.5p per share (a premium to the share price at the time of signing Heads of Agreement with Bluwstuff Limited). The Loan Notes are interest bearing at 10% pa, payable quarterly in arrears.  The holder may elect to capitalise interest. In addition the holder is entitled to PIK ("payment in kind") interest on redemption.
 
The issue of the Loan Notes is conditional upon shareholder approval and the completion of the Acquisition.
 
General Meeting

As set out above, the acquisition and the issue of the Loan notes is conditional on shareholder approval of the issue of shares, and a circular convening a General Meeting is expected to be sent to shareholders shortly. The Circular will be available on the Company website: www.litebulbgroup.com
 
Simon McGivern, LiteBulb Group CEO, commented, "The acquisition of Bluwstuff is a further step in our strategy of expansion both organically and by targeted acquisitions. Given the similarities of the two businesses the addition of Bluwstuff is a natural fit and it further positions LiteBulb Group as a leading developer of innovative branded products that are then distributed through an expanding network of blue-chip retailers and international distributors. The strong support from respected institutional investors for the fundraising is a further endorsement of our strategic plan and growth ambitions."
 
Charlie Rudge, Bluwstuff CEO, commented, "We are delighted to become part of the LiteBulb Group.  Through the combined capabilities, we have a dynamic and scaled platform to launch our new products and brands into international markets."

Related articles