Blue Note announces signing an integration agreement
with Casta Diva Group
March 31, 2016
The board of directors of Blue Note S.p.A. (chaired by Paolo Alfonso Colucci, principal shareholder with a 36.28% stake – hereafter “Blue Note”) – a historic market brand leader in Europe in the sector of jazz concerts and owner of the jazz club and restaurant by the same name, listed on the Alternative Capital Market (“AIM”) of the Milan Stock Exchange – communicates that it today approved the signing of a framework agreement (the “Framework Agreement”) for integration with Casta Diva Group S.r.l. (hereafter “Casta Diva Group”).
Founded in 2005 by Andrea De Micheli and Luca Oddo (respectively CEO and President with a 40.3% stake each), Casta Diva Group is a leading international communication company in the production of digital and video content in the communication field and is active in the organization of events in the areas of show business, culture and sport. Casta Diva Group operates on four continents with offices in 13 cities and ended financial year 2015, at the consolidated level, with revenues of €20,261,000, an EBITDA of €1,620,000, group profits of €710,000 and a net financial position of €1,370,000.
The Framework Agreement calls for the operation to take place through the merger of Casta Diva Group into Blue Note. Technically the merger constitutes a reverse takeover and will therefore be subject to approval by Blue Note’s shareholders. It is expected that the operation will be finalized in the third quarter of 2016.
The combined entity, which will take the company name of Casta Diva Group S.p.A., will result in the integration of the activities of Blue Note and Casta Diva Group with the aim of jointly developing their traditional core businesses, creating synergies between their activities and sharing their know-how.
In order to support the growth and joint development programmes of the company resulting from the business combination, a share capital increase is being studied which will be proposed as an option to the existing members and to the market with a view to expanding the float after finalization of the merger operation.
Paolo Colucci, President of Blue Note SpA, declared: “The merger with Casta Diva Group represents an excellent opportunity for Blue Note to continue to develop and valorize even more its mission: the production of high-quality live music, content and cultural entertainment.
“I have great admiration for what Andrea De Micheli and Luca Oddo, together with their partners, have accomplished with Casta Diva: technical excellence, creativity of content, and a network of clients and branches of great prestige and geographic reach. Together, the two companies will be able to leverage their reciprocal strengths and create synergies in numerous sectors, from content to events.
“Blue Note arrived on the AIM in July 2014, the world’s first case of the listing of a jazz club, with the declared purpose of growing, in synergy and marked by quality. This merger confirms the validity and concreteness of the path taken. The ambitious growth projects that we have shared with Casta Diva are exciting for us and as Blue Note we are ready to do our part. The challenge continues.”
Luca Oddo and Andrea De Micheli, President and Managing Director of Casta Diva Group, stated: “Casta Diva Group and Blue Note are two unique companies, each in their sector. Casta Diva is a “pocket-sized” multinational communication company, active for eleven years in branded content, commercials, corporate events and digital communication. For their part, in just thirteen years Paolo Colucci and his staff have created the extraordinary fame of Blue Note, recognized as the best jazz club of continental Europe. With admirable coherence they have proposed to the consumer and corporate public the best that the world has to offer in this genre, both in its club in Via Borsieri and in summer festivals. The merger of two market leaders like Casta Diva and Blue Note creates a major player in the entertainment and corporate events sector, precisely at a time when corporate communication is also increasingly turning to content producers. Our integration and strong synergies will pave the way for the realization of innovative corporate and consumer communication formats to disseminate also at the international level.”
MAIN TERMS OF THE OPERATION
In the context of the business combination, for each registered share of 1 (one) euro of the company capital of Casta Diva Group, its members will receive 81,328 ordinary no-par value shares of Blue Note, without money adjustments. In service to the share exchange, Blue Note will therefore issue 9,035,541 ordinary no-par value shares which, because of the aforesaid share exchange ratio, will be allotted to the members of the Casta Diva Group.
The share exchange ratio, which will be supported and possibly confirmed by the fairness opinion expressed by the expert appointed by the Court of Milan (as per Article 2501-sexies of the Civil Code), also bearing in mind the ongoing due diligence activities and pertinence values of Casta Diva Group resulting from the scope of consolidation, involves a valuation of the two companies described as follows:
– Blue Note has been valued at €4,308,000 on the basis of its average capitalization on AIM in the course of the six months prior to the announcement of the merger operation, also backed up by additional valuation methods such as the market multiples method regarding comparable listed companies and the discounted cash flow method (discounting back the prospective cash flows resulting from the business plan drawn up by the Blue Note management).
– Casta Diva Group has been valued at €27,081,000 on the basis of the average of the valuations deriving from application of the market multiples method regarding comparable listed companies and the discounted cash flow method (discounting back the prospective cash flows resulting from the business plan drawn up by the Casta Diva Group management).
Due to the effect of the application of the aforesaid share exchange ratio, the shares held by Blue Note’s current shareholders will flow, with the exception of the stake held by Paolo Colucci, entirely into the float of the company resulting from the business combination. This float will be set indicatively at a maximum percentage of 8.75%, assuming that the percentage of withdrawal of Blue Note’s shareholders as a result of the merger operation decision is nil.
Andrea De Micheli and Luca Oddo will hold in any event, either directly or through a newly formed company, de jure control of the combined entity resulting from the merger. Moreover, they will directly or indirectly assume a lock-up commitment of the stake held in Blue Note for a period of 12 months from the effective date of the merger. Paolo Colucci will assume lock-up commitments regarding his stake until the effective date of the merger and for a period of six months thereafter, with reference to 75% of his stake.
On the basis of what is provided by the Framework Agreement, the combined entity will be managed by a board of directors composed of up to seven members. The Chairman will be Luca Oddo and Andrea De Micheli will be managing director for the entire activity of the group, while Alessandro Cavalla will continue to hold the position of managing director for the Blue Note activity. Paolo Colucci, founding member of Blue Note, will continue to be a member of the board of directors of the combined entity and will continue his commitment for Blue Note as in the past as well as perform an active role for the purposes of its integration with Casta Diva Group. The other members of the Board of Directors have not been identified.
CONDITIONS AND TIMING
The merger constitutes a reverse takeover in accordance with Article 14 of the AIM Italia Issuers’ Regulation, as the operation involves exceeding the 100% threshold in all the foreseen relevance indicators and determines a substantial change of the business of Blue Note and of its board of directors, as well as a change of shareholder control of Blue Note.
The operation will therefore be subject to approval by Blue Note’s shareholders.
The efficacy of the Framework Agreement and of the merger are strictly conditional upon approval of the merger by Blue Note’s shareholders by 30 June 2016, in accordance with Article 14 of the AIM Issuers’ Regulation, in a manner that meets the requirements in Article 49, paragraph 1, letter g) of the Issuers’ Regulation, approved by CONSOB in its resolution 11971/1999 (so-called “Whitewash”), for the purposes of exemption of the Casta Diva Group shareholder from the obligation of a global takeover bid.
The merger operation is also strictly conditional (unless an agreement otherwise is reached by the parties, which will be promptly communicated) upon (a) approval of the financial statements of Blue Note and Casta Diva Group as at 31 December 2015 in line with the approved draft budgets by 30 April 2016; (b) issuance of certification without reported irregularities, by 31 May 2016, by the auditor of the consolidated financial statements of Casta Diva Group and Blue Note for the year ending 31 December 2015 and of the 2015 pro forma data; c) positive outcome of the legal, fiscal, accounting and financial due diligence, as well as on the adequacy of the management control system, and therefore issuance of the related comfort letters by the professionals charged with the respective due diligences; (d) positive opinion in regard to the fairness of the share exchange ratio of the merger by the joint expert appointed in accordance with Article 2501-sexies, paragraph 4 of the Civil Code, (e) issuance by the Nominated Adviser (“Nomad”) of the attestations foreseen by the AIM Issuers’ Regulation for the publication of the Information Document in relation to the merger, provided for by Article 14 of the Regulation, by 31 May 2016, (f) issuance of a comfort letter in relation to the declaration on Blue Note’s current assets following finalization of the merger, by 20 May 2016; and (g) non-exercise of the right of withdrawal by members of Blue Note, which envisages an overall withdrawal value greater than €430,000 (four hundred and thirty thousand euros) on the basis of the determination of this value in accordance with Article 2437-ter of the Civil Code.
It is expected that the meetings of Blue Note’s shareholders and Casta Diva Group’s members for approval of the merger will be held by the end of the first half of 2016 and that the merger operation will be finalized in the third quarter of 2016.
The Information Document in relation to the merger, provided for by Article 14 of the AIM Italia Issuers’ Regulation, will be published upon completion of the financial, legal and fiscal due diligence provided for by Schedule 3, paragraph AA2 of the Nomad Rules, and issuance of the related comfort letters by the involved consultants, indicatively by the end of May 2016.
Consequently, the Blue Note stock will be suspended from trading on the AIM Italia list as of today and until publication of the Information Document and issuance of the attestations as per the AIM Issuers’ Regulation.
ADDITIONAL INFORMATION
Integrae SIM S.p.A. acts as Nomad of Blue Note.
Blue Note and Casta Diva Group have been assisted by the Studio Legale LCA for the legal aspects and by the Studio Rossi & Associati Business and Law Firm for the fiscal and tax aspects.
Emintad Italy S.p.A. acts in the capacity of financial adviser of Blue Note, while Kobo Capital Ltd. is the financial adviser for Casta Diva Group.
Epyon S.r.l. will perform the financial and the management and control system due diligence, issuing the related comfort letters.