Akazoo Limited

Penta Capital and InternetQ plc (LSE-AIM: INTQ), a leading provider of mobile marketing and digital entertainment solutions for mobile network operators and brands, is pleased to announce a strategic investment into the Company’s popular subscription-based music streaming service, Akazoo, by a consortium led by Toscafund Asset Management LLP (“Toscafund”) and Penta Capital LLP (“Penta Capital”).

Tosca Penta Music LP (“Tosca Penta Music”), a special purpose investment vehicle backed by Toscafund and managed by Penta Capital, is investing c. €17 million (£12 million) in cash into the UK registered entity that will hold the Akazoo business, operations and platform. Concurrently, the shareholders of R&R Music Ltd (“R&R Music”), the London-based IP/patent-powered music recommendation and user profiling technology company, have agreed to contribute their business to the new Akazoo group. The cash investment will be used to grow Akazoo’s operations and footprint and expand the new entity’s proposition across new verticals through continued development of the Akazoo platform and R&R Music’s technologies.

Based on the subscription terms of the new investment, the implied post-money valuation of the enlarged Akazoo business (including R&R Music) at announcement is approximately €104 million, with InternetQ holding c. 69.1% of the shares, while Tosca Penta Music and R&R Music’s founders and existing investors hold the remaining shares. The enlarged business, headquartered in London, UK, will be effectively debt-free at the outset and will have a dedicated board of directors.

Iain Barrie Johnston, Non-Executive Director of InternetQ, and Panagiotis Dimitropoulos, CEO and Founder of InternetQ, will be appointed Chairman and member of the new board of directors respectively.

Apostolos N. Zervos, currently SVP of Akazoo at InternetQ, will be appointed Chief Executive Officer of the enlarged business and David Ritchie, currently CEO of R&R Music, will become Chief Strategy Officer.

Strategic Rationale

In light of the increasing demand for content streaming and related services globally, and recent successes of Akazoo in penetrating blue chip customers and large, attractive geographies, this transaction is particularly timely for InternetQ. It provides significant new cash resources, IP, human capital, operational and technological synergies and other related assets to further build on the strong momentum of InternetQ’s B2C services as a differentiated and broad offering that is attracting a significant subscriber base globally. Similarly, the structural separation of Akazoo aims to improve focus on InternetQ’s respective business lines, while maintaining control of both.

Panagiotis Dimitropoulos, Chief Executive Officer and Founder of InternetQ commented:

“We are delighted to announce this landmark transaction for our digital entertainment business and our Akazoo brand. We welcome Toscafund and Penta Capital as business partners. We look forward to working together with the founders and employees of R&R Music to drive synergies and grow the enlarged business. Our music and digital entertainment business now has additional ammunition to continue to innovate and serve real customer needs and desires across the globe, and play an important role in enriching products and offers for unserved verticals and geographies.”

Eric Nicoli CBE, Chairman of R&R Music, commented:

“We’re hugely excited to combine forces with the excellent Akazoo team to create an entity which, when underpinned by the support of InternetQ and new funding from Tosca Penta Music, will have the expertise, technology and propositions to become an increasingly important international player in the digital music, social media and data space.”

R&R Music was founded in London by David Ritchie and Eric Nicoli. R&R Music works with all forms of content, but primarily focuses on music. It combines patented algorithms, behavioural science, expertise with social media, and human curation to create a highly innovative profiling and recommendation engine and boasts a range of unique and compelling products and services for music fans, artists, businesses and brands.

Martin Hughes, CEO and founder of Toscafund, commented:

“It is always pleasing to meet and work with like-minded entrepreneurs that judge success over a period of years. Having supported the development and growth of R&R Music and its predecessor since 2007, it is a pleasure to move to the next phase of growth in combination with Akazoo and the excellent management teams of both businesses.”

Toscafund, founded in 2000 and based in London, is a multi-asset manager of institutional, private family and retail funds. Total funds under management are presently $4bn.

Penta Capital is a UK mid-market private equity investor. It currently manages over £300 million of commitments from its funder groups. It has successfully invested in a number of technology businesses in recent years, including the recently announced exit of Six Degrees Group.