Business Context and Reporting Period
This Form 8-K, filed on August 25, 2021, by Entravision Communications Corporation (EVC), reports the entry into a material definitive agreement to acquire the remaining 49% equity interest in Redmas Ventures, S.L. ("Target"), a digital advertising company. The transaction is effective as of September 1, 2021, resulting in Entravision Digital Holdings, LLC owning 100% of the Target.
Key Financial Metrics and Transaction Structure
The filing does not provide specific revenue, profit, cash flow, or debt figures for Entravision Communications Corporation. The financial terms of the acquisition are structured as follows:
- Acquisition Consideration: Payment is made via "Earn-Out Payments" based on the Target's EBITDA, calculated as 49% of the Target's EBITDA multiplied by 6, then divided by 3.
- Payment Schedule:
- By April 2022: Based on 2021 EBITDA.
- By April 2023: Based on 2022 EBITDA.
- By April 2024: Based on 2023 EBITDA.
- Additional Payment: An additional payment of up to $10,000,000 is due by April 2024, reduced by 49% of any amounts paid by the Target for acquisitions.
- Acceleration Clause: Sellers may elect to accelerate Earn-Out Payments upon a change of control of the Target or the Company.
Material Changes and Agreement Termination
Concurrent with the new Share Purchase Agreement, the "Put and Call Option Agreement" dated October 13, 2020, is terminated in its entirety effective September 1, 2021. Previously, this agreement granted Sellers a Put Option (starting April 2022) and the Acquiror a Call Option (in 2024) to transact the remaining 49% stake at a price based on six times the Target's 12-month EBITDA.
Outlook, Risks, and Management Commentary
Management issued a press release on August 31, 2021, regarding the acquisition (Exhibit 99.1). The filing notes that the information in the press release is not deemed "filed" for purposes of Section 18 of the Exchange Act. The transaction is subject to representations, warranties, covenants, and indemnities detailed in the full Share Purchase Agreement.
Investor Verification Checklist
- Verify the specific EBITDA figures for Redmas Ventures, S.L. for 2021, 2022, and 2023 to calculate the total potential earn-out liability.
- Review the full text of the Share Purchase Agreement (Exhibit 10.1) for specific conditions precedent to closing and indemnity caps.
- Assess the impact of the acceleration clause on future liquidity in the event of a change of control.
- Confirm whether the Target has made any acquisitions that would reduce the $10,000,000 additional payment.