SW1 (ASX) Ann: Swift Buys Digital-Out-Of-Home Media Network, Medical Media

Originally posted by Brett M H: ↑

I have re-read the Performance Shares summary (see below), and the main part that I am a little concerned about is the 4 year time frame for this large amount of performance shares to be issued?

We weren't given any revenue or EBITDA figures for MM (which would have made any analysis easier), but given that SW1 should improve the MM business significantly, why would SW1 give the MM shareholders 4 years to generate the $10m - $13m in revenues that are outlined in the below "share hurdles"?

Also, the step up in revenues required to achieve the next class of performance shares is very small - in order for MM shareholders to get the large amount of "additional shares"? Maybe "steps" something more like $10m advertising revenue / 12m / $14m / $16m / $18m etc would have been more appropriate?

I am long on SW1, and bullish on this company, but I would be interested to get some other thoughts on the way that these performance shares have been structured. Thanks!!

SUMMARY

An additional $20.5 million in Performance Shares will be issued at the issue price with the following key terms:
• 68.106 million performance shares in six tranches (Class C, D, E, F, G, and H);
• Expire 4 years from completion of transaction;
• Not able to convert within 12 months from completion of transaction;
• Performance shares will convert to one ordinary share in Swift upon achieving the agreed performance milestone; and
• Subject to 6 month voluntary escrow upon conversion to ordinary shares.

Class C No. of Shares Hurdle Class C 18,272,425 $10m in advertising revenue generated through Medical Media’s screen network in a consecutive 12 month period

Class D* 16,611,296 $11m in advertising revenue generated through Medical Media’s screen network in a consecutive 12 month period

Class E 8,305,648 $11.5m in advertising revenue genrated through Medical Media’s screen network in a consecutive 12 month period

Class F 8,305,648 $12.0m in advertising revenue genrated through Medical Media’s screen network in a consecutive 12 month period

Class G 8,305,648 $12.5m in advertising revenue genrated through Medical Media’s screen network in a consecutive 12 month period

Class H 8,305,648 $13.0m in advertising revenue genrated through Medical Media’s screen network in a consecutive 12 month period F

*The vendors have the right to appoint a second Non-Executive Director to the board of the Company following the conversion of the Class D performance shares.

Expand

Hi Brett
While the performance shares are over an extended period. It's preferable to have them than pay for MM without any performance hurdles. The multiple struck is lower than other recent deals in the sector and it gives SW1 the advertising platform they are looking for. From a half glass full perspective, MM brings new screen sectors and gives the opportunity to leverage their existing screens to generate more revenue via targeted advertising. Additionally, MM are confident in the Swift model which should be a very good sign for us. I think this a WIN/WIN.

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