Digital Ally and Clover Leaf Capital (CLOE), a publicly traded special purpose acquisition company (SPAC), have announced that the former's subsidiary Kustom Entertainment and CLOE have entered into a merger agreement.
Kustom Entertainment is a wholly owned subsidiary of Digital Ally, which focuses on live events, concert production and ticketing. The group comprises TicketSmarter and Kustom 440.
Last year TicketSmarter owner Digital Ally, which supplies video technology to law enforcement agencies, announced plans to split into two independent companies, one of which would focus on the live entertainment industry.
The merger agreement is expected to provide Kustom Entertainment with the ability to be a stand-alone entity with a focus on producing events, festivals and entertainment alongside primary and secondary ticketing.
Digital Ally will remain an independent public company following the merger, while TicketSmarter and Kustom 440 will combine their management teams.
CLOE chief executive Felipe MacLean said: “I am thrilled to announce the business combination of CLOE and Kustom Entertainment. I believe that the new publicly traded company has the capability to become a leading player in the live entertainment industry, providing ticketing, sponsorship, marketing, and event operation services for consumers in the United States.
“Kustom is well positioned to boost its growth through innovative marketing, production capabilities, and new technology. The Kustom team is an all-in-one event production group with passionate and experienced leadership, capable of forging great partnerships and capturing more events across the nation. We believe that together, CLOE and Kustom, can create a powerhouse in the live entertainment industry.”
Stan Ross, current CEO of Digital Ally and future CEO of Kustom Entertainment, added: “We could not be more excited to be entering into this agreement. The principals of CLOE understand our business, our objectives, and will make meaningful partners in our business, particularly the expansion of both our ticketing and entertainment platforms, specifically in Latin America.
“CLOE understands how we can implement blockchain technologies to improve our business model and we are excited to begin working with them to implement these technologies into our offering.”
The combined company will be known as Kustom Entertainment and the transaction contemplates an equity value of $125m (£100m/€117m). The combined company is expected to have an implied initial pro forma equity value of roughly $222.2m, with the proposed business combined expected to provide approximately $18.1m in gross proceeds from the cash held in tryst by CLOE, assuming no redemptions.
Digital Ally will distribute to its shareholders 15% of the shares obtained in Kustom Entertainment immediately following the closing of the merger. It also intends to distribute the balance of such shares following a six-month lock-up period.
The transaction has been approved by Digital Ally and CLOE boards of directors and is subject to approval by the stockholders of CLOE and other closing conditions.
Maxim Group served as sole financial capital markets advisor to Kustom Entertainment, while Sullivan and Worcester is serving as its legal counsel and Ellenoff Grossman and Schole is serving as legal counsel to CLOE.