Vinyl Group Expands with Acquisition of Web3 Pioneer Serenade
VNL (VNL) Share Update September 2024 Sunday 29th
Vinyl Group Acquires Web3 Platform Serenade
Melbourne, Australia – Vinyl Group (ASX: VNL), Australia's only ASX-listed music company, has announced its acquisition of Serenade, a London-based Web3 platform specializing in physical and digital collectibles. This strategic move aims to accelerate Vinyl Group's expansion into the UK and European markets.
Instant Summary:
- Vinyl Group acquires Serenade in an all-scrip deal.
- Expansion of Vinyl.com into UK and European markets.
- Addition of physical and digital collectibles to Vinyl.com.
- Breakeven acquisition on a pro forma basis.
- Upfront scrip payment of $800K; further scrip earn-out of $1.5M based on P&L targets.
Acquisition Details
Vinyl Group has completed an agreement to acquire the assets of Serenade, a Web3 pioneer in physical and digital collectibles. The acquisition includes 100% of the shares of Serenade's UK subsidiary. This move is expected to significantly bolster Vinyl Group's presence in the UK and European markets.
Serenade's digital marketplace has served over 200 global artists, including notable names like Liam and Noel Gallagher, Muse, Sum 41, Twenty One Pilots, and Thirty Seconds to Mars. Since its launch in January 2024, sales of Serenade's NFC-enabled Smart Formats have grown by 56% month-on-month, with a total of 12,000 units sold in the first half of 2024.
Financial Terms
The acquisition was executed through an all-scrip deal, with an upfront payment of $800,000 in shares, valued at the fifteen-day Volume Weighted Average Price (VWAP) of Vinyl Group shares on the ASX prior to the completion date. This amounts to 8,214,274 ordinary shares, which will be subject to a twelve-month escrow period.
An additional $1,500,000 in shares will be paid to Serenade's shareholders if the combined business of Vinyl.com and Serenade achieves a minimum revenue target of $4,000,000 and Earnings Before Interest and Taxes (EBIT) of $500,000 in the twelve months following the completion date. These shares will also be priced based on the fifteen-day VWAP of Vinyl Group shares on the ASX prior to the end of the twelve-month performance period.
Strategic Impact
The acquisition is expected to be breakeven on a pro forma basis. Serenade's unaudited annualized revenues will contribute to a combined pro forma revenue run rate of $2 million for Vinyl.com. Serenade will continue to operate alongside the Vinyl.com brand, with the goal of improving the gross margins of Vinyl Group's fastest-growing division.
Key Serenade employees, including CEO Max Shand, have joined Vinyl Group. Shand will lead Serenade to achieve its performance goals while also helping to rapidly accelerate the Vinyl.com business. To incentivize performance, Shand will receive five million options upon sale completion, vesting in two equal tranches based on performance and tenure milestones.
This acquisition is a strategic move for Vinyl Group, aiming to expand its market reach and enhance its product offerings. The addition of Serenade's digital marketplace and NFC-enabled Smart Formats is expected to attract more artists and superfans to the platform. The deal's structure, with performance-based earn-outs, aligns the interests of both companies and sets clear revenue and EBIT targets.
Investor Reaction:
Analysts are likely to view this acquisition positively, given the potential for revenue growth and market expansion. The performance-based earn-out structure provides a clear pathway for achieving financial targets, which should instill confidence in investors. However, the actual impact on the stock price will depend on how well the combined business performs in meeting its revenue and EBIT targets.
Conclusion:
Investors should keep a close eye on Vinyl Group's performance in the coming months, particularly in terms of revenue growth and market expansion. The successful integration of Serenade and achievement of the set financial targets will be crucial for maintaining investor confidence and driving stock performance.