Paul Holmes 22 Jul 2010 // 11:00PM GMT
By Arun Sudhaman
LONDON: Beleaguered Australian holding company Photon Group is poised to complete re-negotiation of a series of costly earn-out payments with founders of 15 of the 16 agencies it acquired in 2007 and 2008.
The development is expected to pave the way for the company to begin a new A$200m capital raising and eventually re-list on the Australian Stock Exchange. It is understood that Photon’s three UK acquisitions – Frank PR, Hotwire and Naked – have agreed in principle to the new terms.Under the new deals, agency founders – which include Frank shareholders Graham Goodkind and Andrew Bloch, and Hotwire founders Kristin Syltevik and Anthony Wilson – have been offered an upfront cash component of 35 per cent of the amount owed.
As expected, a portion of the remaining cash payments are to be exchanged for shares in Photon. An additional cash component is linked to the performance of both Photon Group and the individual agency.
“It’s a one size fits all deal,” said one source involved in the process. “You either take it or you don’t. The alternative is you wait for your earn-out to end and ask for your money and they don’t have it.”
According to an Australian trading update, the new deals will cut Photon’s earn-out payments to A$86m, down from A$168m.
The group has been forced into this position because of the disastrous performance of its internet and e-commerce division, which it has disbanded after writing down $90 million in “non-cash intangible impairment charges”.