Standard list shell Electric Guitar (LON: ELEG) has secured a potential reverse takeover candidate. It was seeking digital advertising businesses as part of a strategy to be a consolidator in the sector. The target is 3radical, which is run by one of the founders of marketing software company Alterian, which was quoted on the Main Market for more than one decade before being acquired by SDL International for £68.4m.
The deal places an initial valuation of £3m on 3radical. The published accounts show shareholder funds of £4.93m at the end of March 2023. That includes a deferred tax asset of £1m and an R&D tax asset of £190,000.
This is a company balance sheet so there are also loans of £2.82m and £999,000 equity investment relating to subsidiaries. There are offices in the UK, North America and Asia Pacific. Since the year end, there have been shares issued at 27p each.
David Eldridge was boss of Alterian when it floated in 2000 but left one year before it was taken over in 2011. He formed audience capture and consented data capture company 3radical at the end of 2011. 3radical collates data and gets permission to use it through gamification software called Voco. This provides a personalised experience. The data can include biometric information.
The NSPCC signed up with 3radical as part of a campaign to acquire new supporters and retain the ones it already has. The technology helps to learn what motivates the donors.
Trading in the shares has been suspended at 2.1p, which values the company at £1.2m. At the end of September 2022, there was £659,000 in cash.
If the acquisition goes ahead, Electric Guitar plans to move to AIM once the transaction is completed. The enlarged company would not be big enough to return to the standard list.