AD1 Holdings Expands Portfolio with Oliver Grace Acquisition and $1.6M Placement
AD1 (AD1) Share Update July 2024 Sunday 28th
AD1 Holdings Acquires Oliver Grace, Raises $1.6M in Successful Placement
AD1 Holdings Limited (ASX:AD1) has announced a significant move to acquire Oliver Grace Pty Ltd, a leading marketing agency, along with a successful $1.6 million placement. This strategic acquisition aims to bolster AD1's market position and drive future growth.
Instant Summary:
- AD1 Holdings acquires 100% of Oliver Grace Pty Ltd.
- Successful $1.6 million placement through the issue of 320 million shares.
- Oliver Grace founders to remain with the business for at least two years.
- Acquisition expected to create significant cost savings and revenue growth opportunities.
- Placement shares issued at $0.005 per share, a 16.6% discount to the previous closing price.
Acquisition Overview
AD1 Holdings Limited has entered into a conditional binding Share Purchase Agreement (SPA) to acquire 100% of the issued shares in Oliver Grace Pty Ltd. Oliver Grace is a Melbourne-based marketing agency specializing in digital product design, brand strategy, and content creation. The acquisition is valued at up to $2 million, payable in tranches of cash and shares.
Founded by Bonnie Borland and Nicholas Lehrain, Oliver Grace has served major clients like Bunnings, Girls in Tech, JB-HiFi, and Nestle. Both founders will stay with the company for at least two years post-acquisition to ensure a smooth transition and continued growth.
Strategic Rationale
The acquisition aims to leverage the synergies between AD1 and Oliver Grace, creating new revenue opportunities and reducing costs. AD1 has identified several benefits from the acquisition, including new organic revenue opportunities, rebranding and repositioning of external assets, and reduced external advisor costs by bringing functions in-house.
AD1's CEO, Todd Perkinson, expressed excitement about the acquisition, highlighting the potential for economies of scale and cost savings. The Oliver Grace team, known for their award-winning work, will bring fresh ideas and depth to AD1's talent pool.
Successful Placement
In addition to the acquisition, AD1 completed a placement of 320 million fully paid ordinary shares, raising $1.6 million. The placement was well-received by both existing and new institutional investors, with shares issued at $0.005 each, representing a 16.6% discount to the closing price of $0.006 on 22 July 2024.
The placement is divided into two tranches. Tranche 1 raised approximately $650,000, while Tranche 2 is expected to raise around $950,000, pending shareholder approval at an extraordinary general meeting in September 2024. The funds will be used for the upfront cash consideration of the acquisition, working capital, transaction costs, and AD1's expansion into North America.
Key Terms of the SPA
The SPA outlines the acquisition terms, including an upfront cash payment of $400,000 and additional payments in shares and cash over the next few years. The sellers will receive deferred payments and an earnout payment if Oliver Grace meets specific revenue and EBITDA targets.
Completion of the acquisition is subject to customary conditions precedent, including no breach of warranties and the continuation of key executives in the business. The acquisition is expected to be completed by 6 August 2024.
The acquisition of Oliver Grace is expected to strengthen AD1's market position and drive future growth. The cost savings and new revenue opportunities could positively impact AD1's financial performance. However, the issuance of new shares at a discount may dilute existing shareholders' equity, potentially affecting the stock price in the short term.
Investor Reaction:
Investors and analysts have reacted positively to the acquisition, noting the strategic fit and potential synergies. The successful placement also indicates strong investor confidence in AD1's growth prospects. Some investors, however, expressed concerns about the dilution of shares due to the discounted placement.
Conclusion:
AD1 Holdings' acquisition of Oliver Grace and the successful $1.6 million placement mark a significant step in the company's growth strategy. Investors should monitor the completion of the acquisition and the upcoming extraordinary general meeting for further developments. The strategic benefits and potential synergies from the acquisition could drive long-term value for shareholders.