(SHDP.L) Shed Media PLC Buy/Sell

RNS Number:6672U Shed Productions PLC 25 November 2005

Shed Productions plc

Acquisition of Ricochet Limited

Shed Productions plc ("Shed" or the "Company"), one of the UK's leading independent television production companies, is pleased to announce the acquisition of Ricochet Limited and its subsidiary companies ("Ricochet").

Summary

* Ricochet is a leading UK independent production company that produces
high quality factual entertainment series, international formats and
documentary series for major broadcasters in both the UK and the US
* Ricochet specialises in long running series and returning brands
* Ricochet programmes include the global hit 'Supernanny', as well as
'It's Me Or The Dog', 'Risking It All', 'How Not To Decorate', 'Who Rules
The Roost?', 'Selling Houses', 'Born to be Different', and 'No Going Back'
* Ricochet produces 'Supernanny' in the US for the ABC network where it is
in its second season
* Initial consideration for Ricochet is #25.0 million in shares, cash and
loan notes, with a further #5.0 million in shares payable conditional upon
performance in the periods ending 31 August 2006 and 30 April 2007
* In the year ended 30 April 2005, Ricochet generated unaudited pro forma
consolidated profit before tax of #2.1 million on turnover of
#15.3 million
* The transaction is expected to be earnings enhancing in the current
financial year
* Shed welcomes Nick Powell and Nick Southgate, Ricochet's Managing
Director and Creative Director respectively, to the Board of Shed
* Shed also announces that its US agents have closed a first look and
script deal with Fox Network and a format deal for 'Bad Girls' with cable
network FX
* Ricochet announces that ABC in America have picked up a further 8 episodes
of 'Supernanny' taking the season run to 22

Eileen Gallagher, Chief Executive Officer of Shed commented:

"Ricochet is a truly quality company and a perfect fit for Shed. It has a talented, driven management team that has built a broad range of high quality entertainment and factual programmes and formats over the last 10 years. Like Shed, the management prides itself in delivering profit to investors as well as high quality programmes for its broadcast customers. Nick Powell and Nick Southgate will both be joining the Shed Board and I look forward to driving the business forward together."

Nick Powell and Nick Southgate, Ricochet's Managing Director and Creative Director respectively, commented:

"Shed are admired throughout the industry for their creative talent and strong management. The opportunity of joining them was irresistible.

Like Shed, Ricochet prides itself on making programmes that people love to watch and talk about. We share qualities which will allow us to create unique opportunities in the future, ensuring that we continue to expand and make memorable TV both here and abroad.

We look forward to an exciting future together."

Acquisition rationale

Shed's strategy from flotation has been to grow both organically, and through the acquisition of suitable production company targets that fit the strict criteria of offering shareholder value, creative fit and where the key creative talent is tied in by ownership.

The acquisition of Ricochet is consistent with these principles. It is expected to be earnings enhancing in the current financial year. Ricochet's wide ranging programme slate broadens Shed's product offering to broadcasters, whilst Ricochet's existing relationships with US broadcasters provide Shed with an exciting opportunity to make further inroads into the US market. In addition, Ricochet qualifies as a regional independent and, as such, benefits from strict regional production quotas applied to UK broadcasters. Furthermore, Shed intends to fully exploit the ancillary rights to Ricochet's productions through wider distribution of international, DVD and licensing rights.

Ricochet has an experienced management and creative team, and Shed is pleased to announce the appointments of both Nick Southgate and Nick Powell to the Board of Shed as executive Directors. Both have been allotted new ordinary shares of 0.1 pence each in the Company ("Ordinary Shares") as part of the consideration for Ricochet, following which Nick Powell will have an interest in 4,836,785 new Ordinary Shares and Nick Southgate will have an interest in 2,195,358 new Ordinary Shares, representing 8.1% and 3.7% of the enlarged issued share capital of the Company respectively. These shareholdings are subject to lock-in arrangements for one year, with orderly market arrangements for one year thereafter.

Consideration

Initial consideration of #25.0 million is to be satisfied as to #7.5 million in cash, #10.0 million through the issue of 9,916,944 new Ordinary Shares at 100.8375 pence per share (being the average of the closing prices on the 20 business days preceding the date of completion), representing 16.6% of the enlarged issued share capital of the Company, and #7.5 million in loan notes redeemable from the first anniversary of completion. Application will be made for the new Ordinary Shares to be admitted to trading, and admission is expected to occur on 1 December 2005. These new Ordinary Shares will not rank for the dividend declared on 16 November 2005 in respect of the financial year ended 31 August 2005. The cash element of the consideration will be funded from Shed's existing cash resources and a new #4.0 million revolving credit facility.

In addition, subject to certain performance criteria for the periods to 31 August 2006 and 30 April 2007, additional consideration of up to #5.0 million will be payable in new Ordinary Shares. The total maximum consideration is therefore #30.0 million.

Ricochet is being acquired on a cash and debt free basis, subject to sufficient funding for its current working capital requirements remaining in the business.

Information on Ricochet

Ricochet is a leading UK independent production company, and produces high quality factual entertainment programming and documentaries for major broadcasters in both the UK and the US. Ricochet has a reputation for innovative and award winning programming; with recent successes including the global hit 'Supernanny', now broadcasting in 37 territories and in its second series on Channel 4 in the UK and on the ABC network in the US. Other programmes that Ricochet has produced and which are now in their subsequent series include: 'It's Me Or The Dog', 'How Not To Decorate, 'Risking It All', 'Who Rules The Roost?', 'Selling Houses', 'Born to be Different' and 'No Going Back'.

Ricochet has strong relationships with broadcasters in both the UK and the US including Channel 4, BBC, Five, ABC and Discovery. Ricochet continues to build on these relationships and develop programming for other broadcasters on both sides of the Atlantic.

In Ricochet's 2005 financial year, the number of hours commissioned increased by 92% on 2004. Ricochet expects a further increase of over 70% in the 2006 financial year, on which it has good visibility with 91% of expected hours already commissioned.

Financial Information

Set out below is unaudited pro forma consolidated financial information extracted from the individual entity statutory accounts of Ricochet Limited (audited for the year ended 30 April 2005) and its subsidiaries with eliminations for inter-company balances.

Year ended 31 April 2005 2004 2003

# '000

Turnover 15,267 7,287 4,769
Gross profit 3,188 1,672 563
Gross margin 21% 23% 12%
Operating profit 2,133 684 124
Operating margin 14% 9% 3%
Profit before tax 2,098 692 127
Net assets 1,831

Director disclosures

Nicholas Craig Powell (42), Managing Director of Ricochet, has worked in the production industry since 1987 at Brook Productions, Diverse Productions and Channel 4. In 1995 he formed Ricochet, assuming the role of Managing Director. During the last 10 years he has executive produced over 300 hours of prime-time network television in the UK, with many of the series having been shown and broadcast throughout the world. He has overseen many projects including, 'It's Me or the Dog', 'No Going Back', 'Selling Houses', 'Risking it All', and 'Supernanny'.

Nick is a director of Ricochet Films Limited (dormant), Ricochet South Limited, Ricochet Digital Limited, Ricochet Limited, Ricochet Productions Limited and Fightbox Limited.

Nicholas Adam Southgate (39), Creative Director of Ricochet, has worked in the production industry since 1988 starting at the BBC. In 1998 he formed Tiga Films Limited and then joined Ricochet in 1999 as a producer/director. At Ricochet, he has executive produced projects including 'Who Rules the Roost?', 'FightBox', 'Tetris: From Russia with Love', 'Posh Rock', 'Mirror Signal Manoeuvre' and 'Living in the Sun'.

Nick is a director of Tiga Films Limited (dormant), Fightbox Limited, Ricochet Digital Limited, Ricochet South Limited, Ricochet Limited and Ricochet Productions Limited.

There are no further disclosures to be made under the AIM Rules.

Service agreements of the new executive Directors

Each of Nick Powell and Nick Southgate has signed a service agreement with Shed for remuneration of #150,000 per annum, terminable on 12 months' notice by either Shed or the executive Director. The salaries are subject to annual review by the Company's remuneration committee but there is no contractual entitlement to any increase in basic salary. Directors may be awarded bonuses at the discretion of the Remuneration Committee.

Each of the executive Directors is also subject to non-competition and non-solicitation covenants in favour of the Company for the period of their employment and for 12 months following cessation of their employment.

Trading Update

Shed further announces that its US agents, UTA (United Talent Agency), have closed two deals in the US market on Shed's behalf. The first is a "first look" and script deal with Fox Broadcasting Corporation in which Shed is paid to develop original drama programming for the Fox Network. The second is a format deal with cable broadcaster FX, part of the Fox family of channels, enabling it to develop a US version of the UK hit 'Bad Girls'.

Ricochet also announces that the ABC network in the US has now confirmed a further order of 8 episodes for the current series of 'Supernanny' bringing the second season run up to a total of 22 hours. This increased commission, awarded 6 months before the contractual deadline, underlines the confidence the network has in 'Supernanny'.

Shed was advised by Bridgewell, Ricochet was advised by Ingenious Corporate Finance, and finance was provided by Barclays.

Analyst meeting

An analyst meeting will be held at 10.30 today at the offices of Bridgewell Securities Limited, 128 Queen Victoria Street, London EC4V 4BJ.

Enquiries:

Shed Productions plc 020 8215 3387

Eileen Gallagher, CEO Jonathon Kemp, FD

Bridgewell
John Craven 020 7003 3000

Simon Blank

Makin PR
Sharon Makin 07918 108 195
This information is provided by RNS
The company news service from the London Stock Exchange

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