Disposal of 2d3 for $25 million

RNS Number : 8007J
OMG PLC
10 April 2015
 

10 April 2015

 

OMG plc

 

("OMG" or the "Group")

 

Disposal of 2d3 for $25 million

 

 

·     Sale of 2d3 to Insitu Inc., a subsidiary of The Boeing Company, for $25 million (approx. £16.8 million) in all cash transaction

·     Profit before tax of the transaction $16.4 million (approx. £11.0 million)

·     Transaction price represents a significant premium over the Group's current EV/EBITDA ratio

·     Net cash generated from the transaction $16.9 million (approx. £11.3 million)

·     45% of net transaction proceeds to be returned to shareholders via an initial £5.1m special dividend

·     Reduces volatility of Group revenue and profit streams and enhances future visibility of earnings

 

 

OMG plc (AIM:OMG) the technology group providing image understanding products for the entertainment, defence, life science, engineering and consumer electronics markets, is pleased to announce the sale of 2d3 - the Group's defence software division focussed on processing, exploiting and disseminating critical intelligence imagery - to Insitu Inc., a subsidiary of The Boeing Company for $25 million (approximately £16.8 million) (the "Disposal"). 

 

Background to 2d3

2d3 is now a leading provider of imaging intelligence solutions to the defence market.  2d3 has over the past seven years created a suite of advanced video and image processing solutions - both organically and through acquisition - that are used by some of the most important defence organisations in the United States, UK, Germany and the Netherlands.

 

Rationale for the Disposal

2d3's success in the defence market stems from the superiority and responsiveness of its technology and the partnerships it has forged with larger defence contractors. 2d3 has proven its ability to win cornerstone projects with some of the world's largest defence purchasers, including the US Air Force's Remotely Piloted Aircraft Squadron Operations Center, the US Navy and the UK MoD's Defence Science and Technology Laboratory.

 

Whilst these customer relationships have translated into encouraging revenues in recent years, the size and timing of those revenues can be hard to predict. Annual revenue and profit performances can often be dependent upon the outcome of one large deal or subject to variations and scale of changes in public sector spending.  Tier 1 customer relationships take significant time to build and in order to maintain its strong market position, continuous investment in 2d3 technology and product is required.

 

The Group and its shareholders will benefit, post disposal, from a lower cost base and a more predictable, visible revenue stream moving forward. It is also the Group's view that 2d3 could more fully achieve its potential and benefit from competitive advantage as part of a larger, more established organisation.

 

Since 2009, 2d3 and Insitu Inc. have had a successful OEM relationship and a series of 2d3 products are already embedded within Insitu Inc. solutions. 2d3 has now reached the level of maturity that it is of interest to possible acquirers and the Group believe this sale offers a clear, strategic fit transforming Insitu Inc. from a strong partner to a strong parent for 2d3. 

 

Terms of the Disposal

The Group has entered in to a Share Purchase Agreement with Insitu Inc. to sell the entire issued share capital of 2d3 for $25m (approximately £16.8m). The expected profit before tax on disposal will be $16.4 million (approximately £11.0 million). This represents a significant premium over the Group's current EV/EBITDA ratio and recognises significant value for OMG shareholders that is not currently reflected in the overall valuation of the Group. Consideration will be payable wholly in cash, 90% paid upon completion today and the remaining 10% in 18 months' time.   

 

For the year ended 30 September 2014, 2d3 contributed revenue of £5.6m and a profit before tax of £0.5m. The total value of the Net Assets being disposed of is £3.8m including Goodwill and Intangibles of £3.7m which arose through the acquisition of Sensing Systems in 2011.

 

Proceeds and their use

Net cash proceeds from the Disposal are expected to be at least £11.3 million or approximately 10 pence per OMG share, compared to the closing price per OMG share of 41 pence on 9th April 2015.

 

On account of OMG's already healthy net cash position, the Group will return a significant portion of the net cash proceeds to shareholders via a special dividend. A sum of £5.1m, representing 45% of the net cash proceeds will be used to pay a special dividend of 4.5 pence per share. This will be paid on 15th May 2015, following an ex-dividend date of 23rd April 2015 to all shareholders on the register on 24th April 2015. 

 

In the medium term the Group will retain the balance of the sale proceeds for use in general corporate purposes including possible acquisitions, but does not rule out a further cash distribution to shareholders if deemed appropriate in the future.

 

Commenting on the transaction Nick Bolton, Chief Executive Officer of OMG said:

 

"Today's sale is a positive and important step for our Group for several reasons.  First, it represents in many ways the culmination of OMG's guiding strategy: to take great technology, nurture and develop it, and realise meaningful shareholder value from those efforts. Today's special dividend serves as our recognition of the support given to us in this venture by long-standing shareholders.  For the 2d3 team it represents a logical and very exciting development as they see a strong partner of many years become a strong and committed parent."

 

"The sale of 2d3 does not change our Group strategy - it emboldens it. It strengthens the Group's already healthy cash resources and creates a revenue base that is smoother and more predictable moving forward. From this base, we will continue to focus on increasing the profitability of our operations and the pursuit of growth, be that through licensing of our IP or indeed through other corporate activity, where it can enhance the quality and visibility of existing revenue streams."

 

 

 

For further information please contact:

OMG plc

+44 (0) 1865 261800

Nick Bolton, CEO

 

David Deacon, CFO

 

 

 

FTI Consulting  

+44 (0) 20 3727 1000

Matt Dixon / Emma Appleton / Charles Palmer / Harry Staight

 

 

 

N+1 Singer (NOMAD to OMG)  

+44 (0) 20 7496 3000

Shaun Dobson / Jen Boorer

 

 

 

Notes to Editors

 

About OMG plc

 

 

OMG plc (Oxford Metrics Group. LSE: OMG) is a group of technology companies producing image understanding products and services for the entertainment, life science,  engineering industries and consumer electronics markets.

 

The Group's technology is used globally to capture the movements of actors (for the movie industry), sportsmen and women (for video games or improving team performance), and children with cerebral palsy, rehab patients and animals (for medical, life science and research industries). The technology is also used for the management of pavement and street furniture. Through this diverse offering the Group has earned its strong international reputation for precision from pixels and its unique expertise in imaging technology.

 

Founded in 1984, the Group is headquartered in Oxford, UK, and has two offices in the US and four in the UK. It has customers in over 50 countries and is a quoted company listed on AIM, a market operated by the London Stock Exchange. The Group trades through three subsidiaries: Vicon, the world's largest motion capture and movement analysis company, Yotta, a provider of software and services for infrastructure asset management and OMG Life our IP licensing business which is focused on unlocking latent value in OMG's IP.

 

The Group's global clients spanning the worlds of science, medicine, sport, engineering, gaming, film and broadcast include: major hospitals and research facilities such as Guy's Hospital, Nuffield Orthopaedic Centre, Headley Court and Loughborough University, engineering industry leaders including: Ford Motor Company, BMW, Toyota and European Space Agency and in the entertainment sector; The Imaginarium, Sony, Industrial Light and Magic, Sega, Nintendo, UbiSoft, EA and Square Enix. In infrastructure asset management, clients include Highways England, East Sussex, Kent, Lancashire, Transport for London, UK Power Network, Cheshire East and West as well as many others.

Ends


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