Acquisition of Rustici and 30% stake in Watershed

LTG has conditionally agreed to acquire the entire issued share capital of Rustici Software LLC, the global market leader in digital learning interoperability, for an initial consideration of USD26 million from its founders, Mike Rustici and Tim Martin. Simultaneously, LTG will provide a USD3 million cash investment for a 30% equity stake in Watershed Systems Inc., developer of the next generation learning analytics platform. Both transactions will be funded through a mix of cash and shares and are conditional on issue of consideration shares and transfer of funds. The Board anticipates the transactions to be materially EPS enhancing in 2016 and beyond. Completion is expected to be announced shortly.

Rustici was established in Nashville, USA in 2002 and has been instrumental in the support and development of the universal technical standards for the e-learning software industry. It is the acknowledged global leader in SCORM (Sharable Content Object Reference Model) conformance. SCORM is the de facto industry standard for e-learning interoperability, allowing online learning content and learning management systems to communicate and work together.

Rustici is also the co-creator of the next generation of learning interoperability standards, Tin Can API, or xAPI. This global standard was created to capture rich data on every aspect of learning experiences. To utilise and exploit this data, the founders created a separate business, Watershed, which has developed a SaaS based learning analytics service to fully ascertain the impact and effectiveness of learning programmes.
Gathering learning data and in turn utilising this data to create more effective learning experiences and tangible business results, is the next significant advance for the learning industry and Watershed is at the forefront of this development.

Tim Martin will remain the CEO of Rustici under LTG’s ownership and Mike Rustici will focus exclusively on Watershed to accelerate the development of this young, high growth business.


• Rustici 4 year revenue CAGR of 41% underpinned by c. 80% recurring revenue

• Increases the Group’s scale, capability and credibility as an international, multi-service
e-learning business

• Significant growth opportunities for Rustici and existing LTG businesses driven by the benefits from the addition of this capability within the Group

• The Rustici acquisition will be immediately and substantially earnings enhancing/accretive

• Watershed investment places LTG at the forefront of creating and utilising ‘big data’ to develop pioneering e-learning content and systems

In the year ended 31 December 2015, Rustici generated unaudited revenue of USD6.6 million and EBITDA of USD2.7 million, with c. 80% of its revenue in recurring subscription fees, derived from products such as SCORM Engine which enables e-learning content to communicate securely with learning platforms, an essential requirement for the entire e-learning industry.


The consideration for Rustici comprises an initial payment of USD26 million of which USD20 million will be paid in cash and USD6 million in new LTG shares, issued at a price of 29.19 pence per share. Cash consideration will be adjusted to take account of surplus cash of USD0.5 million in Rustici at completion. Further performance based payments, capped at USD11 million, are payable to the Rustici vendors and key employees based on ambitious revenue growth targets in each of the years ending 31 December 2016, 2017 and 2018, payable with up to 25% in new LTG shares at the option of the Company, and the remainder in cash.

LTG will invest USD3 million in Watershed for a 30% equity stake. This stake is prior to a further investment by Launch Tennessee, a public-private partnership focused on supporting the development of high-growth companies in Tennessee, of USD1 million, the effect of which will be to subsequently reduce LTG’s equity stake to 27.27%.

The transactions will be part funded by a USD20 million term loan. The loan is amortised over 5 years, repayable in quarterly instalments with a final bullet payment in January 2019.

Jonathan Satchell, Chief Executive of LTG, commented:

“Consistent with our strategy of establishing an international full-spectrum e-learning business, acquiring Rustici, the global market leader in SCORM conformance, firmly places LTG at the heart of the e-learning industry. Further, our investment in Watershed positions LTG in the vanguard of the industry’s future standard, xAPI. This will provide the Group with invaluable insights and a competitive advantage on a platform that will have a profound and long-lasting impact on the digital learning industry.”

Read the full RNS here.