FY16 results were in line and with £8m of contract wins during the year, 7digital looks on track to deliver its targeted FY17 EBITDA profitability. The proposed acquisition of its last significant competitor, 24-7, would add scale, synergy potential and cements its position as the leading provider of platform services to the rapidly evolving digital music industry.
Proposed acquisition and £3m fund raise
7Digital Group PLC (LON:7DIG) is in the final stages of negotiating the acquisition of Copenhagen’s 24-7, its largest competitor. The all-share transaction values 24-7 at approximately £1.6m with 24-7’s parent company, MediaMarktSaturn (Europe’s leading consumer electronic retailer), becoming a shareholder and significant customer of the enlarged group, which will continue to service its Europe-wide Juke! service. The acquisition would add approximately £1m of EBITDA in FY18. In parallel, 7digital has announced a £2.26m share placing (at 6.5p) and open offer of up to £0.75m to raise £3m in total. We estimate the proposed transaction, net with the dilution effect of the share issue would reduce consensus EPS in FY18 by 10% to 15%.
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