Immotion Group to sell LBE arm in $25m deal and return £13.5m to shareholders

Immotion Group's VR technology

Shareholders in Salford-based Immotion Group are in for a £13.5m windfall following a deal for the disposal of its location-based entertainment (LBE) arm and its Uvisan subsidiary.

The sale will lead to the retention of Immotion’s home-based entertainment (HBE) division and a change of name to Let’s Explore Group.

In a stock exchange announcement this morning, the virtual reality entertainment group, announced a deal with LBE BidCo to sell the LBE business for $25,211,739 on a cash free/debt free basis.

In addition, the company said it has completed the disposal of Uvisan for a cash consideration of £100,000. The business was created during the COVID pandemic and provided cleaning technology for headsets and other pieces of equipment.

Following completion of the LBE disposal, the group expects to have approximately £20m of cash, and said it is the directors’ intention to return about £13.5m of the net proceeds to shareholders, equating to around 3p per share, with the board intending to retain circa £6.5m of cash within the company.

This will be used to not only grow the HBE business, but to create a high growth trading group through strategic acquisitions.

It believes the current landscape is ‘capital constrained’ and that there are established trading businesses that have proven their business model, but lack growth capital. The management’s depth of knowledge, both in terms of digital and media marketing, along with financial investment and restructuring, and the ability to perform at speed, makes it well placed to deliver opportunities to deliver enhanced shareholder value.

It said one such acquisition has already been identified which the board will, once the proposed transaction is complete, consider proceeding with.

Immotion Group announced on April 26, 2022, that it intended to spin out both the HBE and Uvisan divisions. But the board has since decided to retain the HBE division and dispose of LBE instead.

HBE’s two key products are ‘Let’s Explore Oceans’, an educational VR pack that includes a smartphone-powered VR headset, holographic cube, and hardback book, and Vodiac, an affordable smartphone-powered VR headset and companion app which provides the user with 75 different virtual reality experiences to try across seven channels.

Immotion revealed that, last year global shopping channel QVC undertook a small trial in the UK selling some 3,000 Vodiac units in a single demonstration. The success of this led to a test in the USA, where 4,000 units were sold in a matter of hours, plus a ‘Today’s Special Value’ promotion on QVC UK, where 23,000 units, some £800,000 of sales, were sold in a 24 hour period.

Sales of the Let’s Explore Oceans packs have been buoyant through both Amazon, and direct to consumers with this line selling out in Q4 2022.

LBE BidCo, Inc. was incorporated by William Luby and James Collis for the purposes of making the acquisition. Ed Wise, former CEO of Omnicom Health Group, is also a part of the Investor group.

Mr Luby and Mr Collis have worked together for more than 30 years in the private equity business with experience completing in excess of 100 acquisitions between them with a focus on the lower middle-market space. They have significant experience in investing in, and working with, companies in the media, entertainment and events sectors.

Rodney Findley will remain with the LBE business and, conditional on deal completion, will resign as director of the company.

Immotion said that, while the company has seen solid growth in the LBE business, the directors believe the proposed transaction demonstrates that its value is not reflected in the current share price, and they believe that the market is undervaluing the value of this business.

While the company is performing in line with expectations, the board believes that the disposals represent a good price for the business in its current form and against the current market backdrop environment and enables the board to provide shareholders with a return of capital per share that is in excess of the current share price, as well as the opportunity to participate in further growth opportunities.

Notwithstanding the current good trading the HBE business is experiencing, the revenue for the year ended December 31, 2022 is expected to be below the revenue for the year to December 31, 2021. This is as a direct result of the board not investing in further stock throughout 2022.

The decision was taken in early 2022 to utilise cash for the expansion of the core LBE business. The introduction of a £250,000 loan allowed the company to purchase limited stock and successfully explore new B2B opportunities. This has given the board confidence, following the sale of the LBE business, to further invest in this business.

The board believes that, given the current economic headwinds, there is, through strategic acquisitions along with growth in the HBE, an opportunity to deliver significant shareholder value. With the cash at its disposal, the company believes it can deliver solid growth and an enhanced shareholder position.

Immotion CEO, Martin Higginson, said: “As I’m sure shareholders will understand this transaction has taken time to conclude, and as a consequence we have been unable to update the market for a number of weeks.

“Given the current economic climate we believe this is a good deal for all shareholders, allowing us to not only return cash per share in excess of today’s share price, but to go forward with renewed energy, and cash in the plc vehicle.

“Furthermore, with access to capital, this proposed sale will allow the business we started, along with team we created, to grow faster. The journey has had a few bumps along the way, not least the COVID pandemic.

“The hardest part of starting any business is the journey through to profitability. We have, despite the challenges, achieved this, and now hand over a profitable business for the next stage in its journey.

“With access to capital, this proposed sale, will allow the business we started, along with team we created, to grow faster. It has been my pleasure to have worked with such a talented team, and I wish them and the new owners well.”

He added: “I am genuinely excited about the next stage in the company’s journey, we have, I believe, got the opportunity to build a highly dynamic trading business, and with a few opportunities already on the horizon, I am looking forward to what the future holds.”

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