Vinyl Group (ASX: VNL), the ASX-listed music company formerly known as Jaxsta, is moving to full control of youth publisher The Brag Media through a $10 million buyout deal to be effectively funded by WiseTech Global (ASX: WTC) CEO and founder Richard White.
Vinyl Group is raising $11 million from White – an existing backer of the company - via a share placement as Vinyl continues to expand its business base following a new direction under CEO Josh Simons.
Today’s announcement led to an immediate boost for Vinyl Group’s shares which were 20 per cent higher at 5.4c at 11.43am (AEDT).
The Brag Media is best known as publisher of the Australian and New Zealand editions of Rolling Stone and Variety magazines, as well as publisher of TheBrag.com, The Music Network and Tone Deaf.
It reaches about 10 million users per month, generating more than 40 million monthly page views, which Vinyl Group says cements its position as Australia’s largest youth publisher.
Vinyl Group is paying an upfront fee of $8 million in cash to acquire 100 per cent of The Brag Media and its subsidiaries, with an additional $2 million payable in cash or stock on an earn-out basis.
Based on unaudited figures, The Brag Media generated $8.39 million in revenue in FY23 to deliver a net profit of $334,824.
While the bottom line appears thin, Vinyl Group says The Brag Media has delivered average revenue growth of 125 per cent over the past two financial years.
The buyout also significantly boosts Vinyl Group’s own revenue base, with the company recording just over $580,000 in revenue in FY23 – a figure that largely comprises income from the music credits database operations of Jaxsta.
The Brag Media’s CEO and co-founder Luke Girgis will remain with the company following the takeover as publisher and managing director of The Brag Media.
As part of his employment agreement, Girgis will receive five million options in Vinyl Group in two equal tranches, with the first vesting upon the company achieving $12 million in revenue and EBIT of $2.8 million in FY24.
The options agreement is also dependent on Girgis remaining with the company for at least a year following the acquisition, while the second tranche vests on the second anniversary of the deal. The options will have a seven-year expiry with the strike price yet to be determined by the parties.
White, the tech entrepreneur whose logistics management software company Wisetech is worth more than $24 billion, backed Vinyl Group in June to the tune of $3 million after the appointment of Simons as CEO.
Simons, who along with Hunters & Collectors guitarist Baz Palmer co-founded Vampr and built it into the world's largest social media network for musicians, took on the leadership of Vinyl Group just weeks after the company’s acquisition of Vampr in early June.
Simons’ vision for Vinyl Group, which culminated in the name change from Jaxsta earlier this month, is to create a ‘global brand dedicated to making, enjoying and monetising music’.
“I have watched closely as Josh has built Vinyl Group's revenue and made substantial business gains since taking my initial investment,” says White.
“I’ve also noted that Luke and his dedicated team at The Brag Media have rapidly grown Brag into one of Australia’s most influential media and creative businesses.
“There’s no doubt that iconic brands like Rolling Stone and Variety make sense and add value to VNL. Combined under the leadership of Josh and Vinyl Group, the consolidated business and team will have a lot more growth levers and options.”
The Brag Media joins Vinyl Group’s existing portfolio of businesses that include music credits business Jaxsta, social-professional network and talent marketplace Vampr and online record store Vinyl.com.
“Vinyl Group’s suite of products work together to empower participants of the music ecosystem and reach all corners of the creator economy, and we can’t wait to start working with the iconic mastheads that Luke and The Brag Media have successfully developed in Australia,” Simons says.
“We’ve identified several impactful synergies between the two businesses that will deliver immediate cost efficiencies and revenue, including streamlining Vampr’s in-app ads business and leveraging The Brag Media’s impressive audience reach to bolster Jaxsta, Vinyl.com and Vampr in the market.”
Girgis sees acquisition by Vinyl Group as the ‘next phase in the evolution of The Brag Media’.
“I couldn’t be happier about it” he says.
“Right from the earliest discussions we had, it was clear that the board, Josh and the team shared our vision for the future of the business, and I’m thrilled that they’ve made this commitment with us.
“I’d also like to acknowledge my co-founder and managing director Sam Benjamin. This business would not have reached the heights that it has without Sam’s investment, support, leadership and mentorship over the past six years.”
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