Clearwater digital marketer takes steps to go public in $757 million deal

Digital Media Solutions in Clearwater, one of the largest and fastest-growing private firms in the Tampa-St. Pete area, could soon become a publicly traded company.

DMS has signed a term sheet and is working on a definitive agreement with Leo Holding Corp. (NYSE: LHC). Leo, based in London, is a blank check company, a firm set up to raise funds and then determine where to invest that money.

The total enterprise value of the proposed transaction is $757 million, Leo said in a Feb. 6 filing with the U.S. Securities and Exchange Commission. That’s 12 times the $63 million in adjusted earnings before interest, taxes, depreciation and amortization [EBITDA] that DMS expects to post this year.

Joe Marinucci

DMS is a digital marketing firm, founded in 2012 and led by CEO Joe Marinucci. Marinucci was an EY Florida Entrepreneur of the Year in 2019 in the professional service category.

DMS has capitalized on the shift from traditional offline advertising to online advertising and marketing. The company has precision marketing tools that connect the right consumers with the right offers at the right time to achieve the marketing objectives of its clients, according to a description on the Inc. 5000 website.

With $156.2 million in 2018 revenue, DMS ranked No. 2,134 on the Inc. list for 2019. The company’s revenue grew 188 percent over three years.

Those numbers are what attracted Leo.

“Leo believes that DMS’s financial profile is compelling with significant historical revenue growth, expected revenue growth for 2020 of over 30 per and strong EBITDA margins and cash conversion,” the filing said.

Leo said it has secured $100 million in commitments from a number of institutional investors to purchase common equity in the post-combination company at $10 a share. DMS’ management team owns 54 percent of the company, while private equity funds managed by Clairvest Group Inc. (TSX: CVG) own the remaining 46 percent. Clairvest supports the deal, Leo said. The sellers are expected to retain about 40 percent ownership in DMS, although that’s subject to change depending on how many of Leo’s current shareholders redeem their shares as part of the transaction with DMS.

It’s far from a final deal. The two sides still have to negotiate and execute a definitive agreement, and both Leo’s shareholders and the Clairvest board have to approve it.

Once the transaction closes, DMS is expected to trade on the NYSE under ticker “DMS.”

Citigroup Global Markets Inc. is capital markets advisor, financial advisor and private placement agent for Leo, while Kirkland & Ellis LLP is Leo’s legal counsel. BofA Securities is acting as financial advisor to DMS.

Leo Holdings is headed by chairman and CEO Lyndon Lea. Lea also is a founding partner and managing partner of Lion Capital, a consumer focused investment firm in with offices in London and Los Angeles.

The deal was struck as Leo faces an approaching deadline to complete an initial business transaction. Leo shareholders will vote Feb. 11 on extending that deadline.