Media and technology business Iconic Labs Plc (LSE:ICON) has agreed to acquire social media agency, Social Alchemist Limited.
Terms of the acquisition have not been revealed but Iconic will pay through a mixture of shares and cash.
Iconic said the acquisition will bolster its offering, build critical mass within its social media consultancy division, enhance content generation and provide proprietary distribution channels.
Social Alchemist is a social media-focused agency with three primary divisions that will complement and expand Iconic Labs' current services.
It provides social media consultancy, content production strategy and creation, primarily for white label branded campaigns, with clients including ITV and student-focused platform TOTUM.
It also operates multiple targeted social media-based platforms such as football-focused Stray Offside, which cumulatively have more than 12 million followers and provide extensive distribution for Social Alchemists' clients.
In addition, Social Alchemist creates original social video production for brands with clients including talent agency YM&U Group and brand agency Chekd Media.
Iconic Labs also revealed it has secured further financing for up to £1.38mln to provide capital to continue to resolve the outstanding legacy issues associated with the previous operating stem cell business, fund the cash consideration element of the acquisition of Social Alchemist. Any money left over will be used for general working capital purposes.
The company, formerly known as WideCells, said the process to resolve the legacy debt issues attached to the previous stem cell business is nearing completion, leaving management free to focus on building a multi-divisional new media and technology business.
Iconic admitted the legacy issues were more complex than anticipated at the time of the reverse takeover and have taken more time and money to resolve than initially expected.
“In particular, it became evident that, despite assurances made by the previous management, a significant amount of debt ascribed to the subsidiaries of the group were in fact liabilities of the company,” Iconic said.
The company now believes there are roughly £600,000 of legacy debts still owing, including to Her Majesty’s Revenue & Customs, which the company intends settling and have been accounted for in its cash-flow forecasts.
In addition, there is some £400,000 claimed by creditors with whom the company is in dispute; a contingency for this has been made in the cash-flow forecasts but the company does not anticipate settling these.
To date, Iconic has spent in the region of £900,000 on legacy issues and the board is confident that this further financing will finally result in all legacy debts being resolved.
"We have an aggressive growth strategy and Social Alchemist, our maiden acquisition, represents a classic example of a growing and innovative business that will add value to our offering,” said John Quinlan, the chief executive officer.
“Social Alchemist, which has an established client list, is highly complementary and we will benefit from synergies and scale as we pitch for new business and look to capitalise on the huge opportunities that both parties recognise are available in the online digital space,” Quinlan added.
The new financing agreement with European High Growth Opportunities Securitization Fund will involve Iconic issuing one-year 5% loan notes to the lender each time it draws down a tranche of the loan.
The financing agreement also provides for warrants to be attached to the notes, subject to the agreement of shareholders.
The company has also agreed to settle with European High Growth Opportunities Securitization Fund the remaining amounts due that were outstanding under the previous financing agreement; this will involve the issue of 238mln ordinary shares to the funds plus further ordinary shares once the warrant conditions have been satisfied.
"To give some clarity for shareholders, the issue and subsequent exercise of the warrants resulting from this loan financing and the issuance of subsequent shares attached to the warrants cannot take place until the company has issued an approved prospectus, convened a general meeting and its shareholders have passed the necessary resolutions. The anticipated timeline for obtaining an approved prospectus and issuing it to the shareholders is within six months of the date of the financing agreement and we anticipate being no shorter than three months from that date,” Quinlan revealed.