Escape Hunt plc (LON:ESC), a leading operator of escape rooms in the fast-growing experiential leisure sector, has announced: –
· the proposed acquisition of Boom Battle Bars for a total consideration of £17.38 million to be satisfied by the initial payment of £9.88 million in cash and deferred consideration through the issue of up to 25,000,000 Consideration Shares payable subject to an earn-out;
· a placing of new ordinary shares to raise £14.775 million for the Company at 30 pence per share (the “Issue Price”) of which £9.88 million will be used to satisfy the cash element of the consideration payable for the proposed acquisition of Boom Battle Bars;
· a subscription of new ordinary shares to raise approximately £0.225 million for the Company at the Issue Price; and
· an open offer to raise up to a further approximately £2.2 million for the Company on the basis of 1 Open Offer Share for every 12 Ordinary Shares held on the Record Date at the Issue Price.
Key Highlights
· Boom Battle Bars is a fast growing experiential leisure business combining competitive socialising activities with cocktails and street food and currently comprises 1 owner-operated venue and 5 franchised venues in the UK.
· Significant advanced pipeline of 21 sites, where 10 have already been signed, including 2 in build, and a further 11 sites which are expected to exchange within 30 – 90 days.
· Total pipeline of 39 sites includes a further 18 sites with outline terms agreed.
· The total pipeline includes £12.6 million of landlord contributions towards build, of which £7.6 million relates to the advanced pipeline.
· Within the advanced pipeline, proposed owner-operated sites include prime sites in London on Oxford Street and the O2 Arena.
· 18 franchisees have already signed agreements to take on franchise sites.
· Potential for co-location of Escape Hunt in several sites, with first co-located site at the Lakeside shopping centre in Thurrock already open
· The Acquisition is expected to be significantly earnings accretive and profitable in the first half of 2022.
· The total aggregate consideration payable for the Acquisition is £17.38 million, to be satisfied by the initial payment of £9.88 million in cash and deferred consideration through the issue of up to 25,000,000 Consideration Shares.
· The Consideration Shares are subject to an earn-out and will only be issued if the performance of the Boom Battle Bars Group in the financial year ending 31 December 2022 meets a combination of turnover and site roll-out targets. The number of Consideration Shares to be issued is subject to a sliding scale based on the extent to which the targets are met.
· The Company is seeking to raise £14.775 million net of expenses (including VAT) pursuant to the Placing through the issue of the Placing Shares at the Issue Price.
· The Company is also raising approximately £0.225 million net of expenses (including VAT) pursuant to the Subscription through the issue of the Subscription Shares at the Issue Price.
· The Company is making an Open Offer to Qualifying Shareholders to raise up to an additional £2.2 million (before expenses) at the Issue Price.
· Each Director, or an associate of each Director, has conditionally agreed to participate in the Fundraising. In aggregate, Directors’ subscriptions total £485,000 (excluding the Open Offer).
· The Issue Price of 30 pence per New Ordinary Share represents a discount of approximately 13 per cent. to the 10 day average closing middle market price per Ordinary Share to 2 November 2021, being the last business day prior to the date of this announcement.
· The Company has been granted a two year exclusivity period by MFT Capital to acquire Flip Out, a family focused leisure entertainment business and the UK’s largest trampoline operator, on pre-agreed terms.
· The Directors believe that the Acquisition presents an unprecedented opportunity to benefit from the trends in experiential leisure and take advantage of the conditions in the retail commercial property market to create in the Enlarged Group a business which has the potential to become one of the UK’s pre-eminent experiential leisure businesses.
· Furthermore, the Directors believe that the opportunity for growth, cash generation and profitability is greater for the combined businesses than for the individual constituents and that there is the potential to generate operational synergies.
· Proposed change of the Company’s name to XP Factory Plc to reflect the changing nature of the Enlarged Group’s business.
· Completion of the Fundraising is subject, inter alia, to shareholder approval to enable the issue of the New Ordinary Shares, which will be sought at a General Meeting of the Company expected to be held at 10.00 a.m. on 22 November 2021.
· Shore Capital Stockbrokers Limited is acting as broker in relation to the Placing and Shore Capital and Corporate Limited is acting as nominated adviser to the Company. KK Advisory Ltd is acting as placing agent.
Further information on the background to and reasons for the Acquisition and Fundraising is set out below. The Bookbuild must close and the Resolutions numbered 1 and 2 must be passed at the General Meeting in order for the Acquisition and the Fundraising to proceed.
If the Bookbuild does not close and/or Shareholders do not approve the Resolutions numbered 1 and 2, the Acquisition and the Fundraising cannot be implemented.
If the Acquisition does not proceed or cannot be implemented, the Company would be impeded in pursuing the strategy outlined for maximising stakeholder value.
Details of the Fundraising
Placing
The Placing will be conducted by way of an accelerated bookbuild process (the “Bookbuild”) which will be launched immediately following the release of this announcement (the “Announcement”), in accordance with the terms and conditions set out in the Appendix to this Announcement (the “Appendix”).
Escape Hunt has entered into a Placing and Open Offer Agreement with Shore Capital. Pursuant to the Placing and Open Offer Agreement, Shore Capital has agreed, in accordance with its terms, to use its respective reasonable endeavours to place the Placing Shares with certain new and existing institutional and other investors.
The final number of Placing Shares will be agreed by Escape Hunt and Shore Capital following the close of the Bookbuild, and the result of the Placing will be announced as soon as practicable thereafter. The timing for the close of the Bookbuild and allocation of the Placing Shares shall be at the discretion of Shore Capital in consultation with the Company. The Placing is not being underwritten.
By choosing to participate in the Placing and by making a verbal offer to acquire Placing Shares, investors will be deemed to have read and understood this announcement (including the Appendix) in its entirety and to be making such offer on the terms and subject to the conditions in this announcement, and to be providing the representations, warranties and acknowledgements contained in the Appendix.
Your attention is drawn to the detailed terms and conditions of the Placing set out in the Appendix to this announcement.
Unless otherwise indicated, capitalised terms in this Announcement have the meaning given to them in the Definitions section below.
Subscription
The Subscription comprises the issue of the Subscription Shares by the Company at the Issue Price. It is anticipated that the Subscription will raise approximately £0.225 million for the Company, before expenses.
The Subscription Shares will be issued credited as fully paid and will, on issue, rank pari passu with the Existing Ordinary Shares, the Placing Shares and the Open Offer Shares in all respects including, without limitation, in relation to any dividends and other distributions declared, paid or made following Admission.
Open Offer
In addition, in order to provide Shareholders who do not take part in the Placing with an opportunity to participate in the proposed issue of New Ordinary Shares, the Company is providing all Qualifying Shareholders with the opportunity to subscribe for Open Offer Shares, to raise up to a further £ 2.2 million (before expenses), on the basis of 1 Open Offer Share for every 12 Ordinary Shares held on the Record Date, at the Issue Price. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility. The Open Offer is not being underwritten.
General
The issue of the New Ordinary Shares is conditional, inter alia, on the passing of Resolutions numbered 1 and 2 at the General Meeting, which is expected to be convened for 10.00 am on 22 November 2021. Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. Admission of the Placing Shares, the Subscription Shares and the Open Offer Shares is expected to become effective and dealings in such shares are expected to commence at 8.00 am on 23 November 2021.
The Placing Shares, the Subscription Shares and the Open Offer Shares, when issued, will be fully paid and will rank pari passu in all respects with the Existing Ordinary Shares.
The Appendix (which forms part of this Announcement) contains the detailed terms and conditions of the Placing.
The Circular containing further details of the Acquisition, Fundraising and convening the General Meeting and the accompanying Proxy Form and Application Form for Qualifying Non-CREST Shareholders is expected to be despatched to Shareholders on 4 November 2021 and will thereafter be available on the Company’s website at https://escapehunt.com/investors/ .
Richard Harpham, Chief Executive Officer of Escape Hunt, said:
“We are incredibly excited to be acquiring Boom Battle Bars, which is highly complementary to our existing Escape Hunt business. The acquisition allows us to capitalise on the growth in experiential leisure and competitive socialising, and significantly improves our ability to access the best property locations in a soft commercial property environment. There are material potential benefits from co-location of sites in the same venues, which will enhance our combined site economics, and the businesses enjoy a strong overlap in target customer, offering attractive cross marketing and brand awareness synergies. The advanced pipeline of sites provides a secure runway for growth for both brands and the Board believes the combination of the businesses will be able to exploit the market opportunity more effectively than either business on its own.”
