System1 (AIM: SYS1) reiterates rejection of Brave Bison’s (AIM: BBSN) £43.1m takeover proposal

System1 Group plc (AIM: SYS1) has reiterated its unanimous rejection of Brave Bison Group plc’s (AIM: BBSN) possible cash-and-share takeover proposal, arguing that the indicative £43.1 million valuation materially undervalues the marketing-effectiveness company. The revised terms offer 68 pence in cash and 2.7553 new Brave Bison shares for each System1 share, valuing the target at 317 pence per share using BBSN’s July 10 closing price. System1 says that represented only a 4 per cent premium to its same-day market value and failed to provide a meaningful premium for control. The dispute is strategically important because Brave Bison already owns approximately 28 per cent of System1 and must announce a firm offer or withdraw by 5pm on August 7. The central tension is whether Brave Bison’s consolidation plan justifies the terms or whether System1’s recovering platform business, proprietary data and £12.4 million cash balance warrant a materially higher valuation.

What exactly is Brave Bison offering System1 shareholders under the revised proposal?

Brave Bison’s revised proposal combines a fixed cash payment with variable share consideration. System1 investors would receive 68 pence in cash and 2.7553 newly issued Brave Bison shares for each System1 share.

Using Brave Bison’s July 10 closing price of 90.5 pence, the proposal was worth approximately 317 pence per System1 share and valued the fully diluted equity at £43.1 million. System1 shareholders would hold approximately 19 per cent of the enlarged Brave Bison group if the transaction proceeded on those terms.

The revised proposal followed an earlier all-share approach made in June. That initial approach offered 3.5988 Brave Bison shares for each System1 share and would have left System1 shareholders owning approximately 24 per cent of the combined company. System1 rejected it because it offered no premium to the target’s prevailing market price.

Brave Bison subsequently introduced the 68 pence cash component while reducing the share exchange ratio. The revised structure was intended to improve the immediate value received by System1 investors without requiring Brave Bison to conduct an equity fundraising.

The cash portion would be financed through a credit facility that Brave Bison says is in advanced negotiation. Based on the approximately 72 per cent of System1 that Brave Bison does not already own, the cash requirement would be relatively modest compared with the headline transaction value.

A formal offer would also need to include an alternative consisting entirely of Brave Bison shares at an exchange ratio of at least 3.36 BBSN shares for each System1 share. That requirement arises from the structure of Brave Bison’s earlier purchases under the UK Takeover Code.

No firm offer has yet been made. The existing terms remain an indicative possible offer and can still be increased, amended or withdrawn.

Why does the System1 board believe the £43.1 million valuation remains inadequate?

System1’s central objection is that the revised proposal does not offer a meaningful premium for surrendering control of the company. Based on both companies’ July 10 closing prices, the 317 pence indicative value was only 4 per cent above System1’s 305 pence market price.

Brave Bison has emphasised that its proposal represents a 65 per cent premium to System1’s 198 pence closing price on February 27, immediately before Brave Bison disclosed its strategic investment in the company.

System1 considers that comparison incomplete. The target issued a positive trading update on March 16 that contributed to a sustained improvement in its share price. The board’s position is that the subsequent revaluation reflected strengthening operational performance rather than merely takeover speculation.

Both arguments contain relevant information, but they answer different valuation questions. Brave Bison’s calculation demonstrates that the proposal is substantially above System1’s value before the bidder entered the share register. System1’s comparison asks whether the proposed consideration adequately compensates shareholders based on the company’s more recent financial trajectory and current independent market value.

The proposal also values System1 at approximately 20.4 times its £2.11 million operating profit for the year ended March 2026. That multiple appears substantial when viewed in isolation, but it does not fully capture the company’s cash position.

System1 ended the financial year with £12.4 million of cash and no debt. A simple subtraction of that cash from the £43.1 million indicative equity value produces an enterprise value of approximately £30.7 million before transaction adjustments and working-capital requirements.

That implied enterprise value is equivalent to approximately 14.5 times reported operating profit or 8.3 times adjusted EBITDA of £3.7 million. Not all of System1’s cash can necessarily be treated as surplus, but the balance sheet materially affects how the offer should be assessed.

The board has also consulted some of the company’s major shareholders. It says feedback received so far supports its conclusion that the proposal undervalues System1. The consultation remains ongoing, and the company has not disclosed what proportion of independent shareholders has formally supported the board’s position.

How does the changing Brave Bison share price affect the value offered to SYS1 investors?

Most of the proposed consideration is being paid in Brave Bison shares, making the real value of the offer sensitive to movements in BBSN’s market price.

At the reference price of 90.5 pence, the 2.7553 shares were worth approximately 249 pence. Adding the 68 pence cash component produced the stated 317 pence value.

Brave Bison subsequently traded around 88 pence. At that price, the share component would be worth approximately 242 pence, reducing the total implied consideration to roughly 310 pence per System1 share.

System1 shares were trading around 334 pence during July 17 midday trading. The market was therefore valuing the target about 8 per cent above the live value of Brave Bison’s indicative terms.

This gap has several possible interpretations. Investors may expect Brave Bison to increase its proposal, believe another bidder could emerge or consider System1 worth more as an independent company. The premium could also reflect uncertainty about whether a formal transaction will proceed.

The falling value of the bidder’s shares creates a difficult feedback loop. A lower BBSN share price makes the proposed consideration less attractive to System1 investors, potentially forcing Brave Bison to increase the exchange ratio or add more cash. Either response could raise concerns among Brave Bison shareholders about dilution, borrowing or the risk of overpaying.

System1’s board highlighted this issue by calculating that the proposal represented a 4.9 per cent discount using the July 16 closing prices of 87.5 pence for Brave Bison and 325 pence for System1.

Brave Bison can improve the headline value by increasing the cash component, issuing more shares or combining both approaches. Each route has a cost. Additional cash would increase leverage or consume balance-sheet capacity, while a higher exchange ratio would dilute existing BBSN shareholders further.

What strategic benefits does Brave Bison expect from combining the two companies?

Brave Bison argues that the combination would create a larger AIM-listed marketing data and technology company with broader capabilities, greater institutional relevance and a more diversified customer base.

System1 provides marketing-effectiveness products that help companies predict how advertisements, brand strategies and product concepts will perform. Its core platform includes Test Your Ad, Test Your Innovation and Test Your Brand.

The company’s differentiation rests on behavioural science, emotional-response measurement and a proprietary database built from the testing of more than 120,000 advertisements and approximately 18 million emotional responses. This data supports tools intended to predict both short-term sales impact and longer-term brand growth.

Brave Bison operates across digital marketing, content, media, e-learning and technology services. Its acquisition of MiniMBA added a scalable marketing-education platform, while other purchases expanded its agency, search, content and sports-marketing capabilities.

The proposed enlarged company would be organised around three broad divisions. Marketing Effectiveness would contain System1’s testing and analytics platform, Marketing Excellence would include MiniMBA, and Marketing Delivery would bring together Brave Bison’s agency and execution services.

Strategically, that structure could cover a larger portion of corporate marketing expenditure. The combined group could help customers train marketing teams, test creative ideas, measure effectiveness and execute campaigns.

Brave Bison also sees cross-selling potential between System1’s global advertiser relationships and its own marketing services. System1 worked with 48 of the world’s 100 largest advertisers during FY26 and increased its total client base from 546 to 635.

A larger group could potentially support greater technology investment, consolidate overlapping public-company expenses and improve access to institutional capital. Brave Bison believes the enlarged business could become eligible for the AIM 100 Index, potentially increasing market visibility and liquidity.

Those benefits remain prospective. The bidder has not provided a detailed, quantified schedule for cost savings, integration expenses or revenue synergies. The strategic logic must therefore be separated from the value being offered to target shareholders.

How reliable are Brave Bison’s £79 million revenue and £14 million EBITDA projections?

Brave Bison says the combined group would generate pro forma net revenue of £79 million and adjusted EBITDA of £14 million before potential cost savings.

Those figures provide an indication of possible scale, but they are not a simple combination of the companies’ latest audited full-year results.

Brave Bison calculated its contribution by annualising net revenue and adjusted EBITDA from the second half of its 2025 financial year. System1’s contribution was based on annualised gross profit and adjusted EBITDA from the second half of its 2026 financial year.

System1 reports revenue on a gross basis, while Brave Bison uses net revenue as a primary performance measure. Brave Bison therefore used System1’s gross profit as the closest comparable measure when constructing the £79 million figure.

The pro forma presentation also annualises periods in which both companies were performing more strongly than earlier in their respective financial years. That approach may better represent current momentum, but it is not equivalent to an audited combined full-year result.

System1’s adjusted EBITDA contribution was based on annualising the £2.7 million delivered in its second half. The resulting £5.4 million annualised figure is materially above the £3.7 million reported for the full financial year because the first half was considerably weaker.

Brave Bison’s contribution was similarly based on annualised second-half adjusted EBITDA of £4.5 million, producing a £9 million figure. Together, these create the stated £14 million pro forma total before synergies.

Investors should consequently treat the figures as an illustration of potential run-rate scale rather than a forecast guaranteed to be achieved. The enlarged group would still need to sustain second-half trading levels, integrate its operations and avoid customer disruption.

Does System1’s second-half recovery justify rejecting the current proposal?

System1 reported revenue of £37 million for FY26, compared with £37.4 million in the previous year. Platform revenue increased 3 per cent to £35.5 million and represented 96 per cent of group revenue.

Profitability weakened as planned investment coincided with reduced client spending. Adjusted EBITDA fell to £3.7 million from £6.6 million, while profit before tax declined to £2.1 million from £5.3 million. Diluted earnings per share dropped to 10.3 pence from 35.2 pence.

These figures support part of Brave Bison’s case. System1’s earnings declined sharply, and the company’s present valuation depends on a significant profit recovery.

However, the annual totals conceal a stronger second half. Revenue during that period was 16 per cent higher than in the first half, while second-half profit before tax was six times the first-half level.

System1 also removed approximately £1 million of annualised costs, although it incurred £500,000 of associated restructuring expenses. Management believes the lower cost base will improve operational leverage if revenue growth continues.

The company added more than 300 platform customers during the year. US platform revenue increased 7 per cent, US new-client revenue rose to £3.5 million from £2.8 million and innovation-related revenue increased 19 per cent.

System1 also signed its largest US contract to date in March, with the contribution expected to begin during FY27. The company says new-business activity has remained strong in the current financial year.

The proposed final dividend was increased to 6 pence per share from 5.5 pence, despite the decline in annual earnings. The dividend and debt-free balance sheet demonstrate financial resilience, although they do not remove the need to rebuild margins.

Rejecting the proposal is justified only if System1 can convert its second-half momentum into sustained earnings growth. If revenue stalls or marketing budgets weaken again, the board could face questions about refusing an offer above the company’s pre-March valuation.

How does Brave Bison’s existing 28 per cent stake change the takeover dynamics?

Brave Bison acquired approximately 28 per cent of System1 in March through a combination of market purchases and a share exchange with founder John Kearon.

Kearon transferred 2.92 million System1 shares in return for 9.81 million newly issued Brave Bison shares. He consequently became an 8.7 per cent shareholder in the bidder and agreed to an 18-month lock-up period.

Brave Bison separately acquired approximately 628,000 System1 shares in the market for £1.3 million at 210 pence per share. Its blended entry price was approximately 242 pence per System1 share.

The stake gives Brave Bison considerable economic exposure to the target and demonstrates that its interest extends beyond an opportunistic approach following recent results. It also means the bidder already benefits from a share of any independent recovery in System1’s earnings.

However, owning 28 per cent does not guarantee control. Brave Bison still needs support from a sufficient proportion of System1’s remaining shareholders and must satisfy the relevant takeover conditions.

The existing holding may deter some competing bidders because any rival would need to address a substantial strategic shareholder. It could also encourage another interested party to engage directly with Brave Bison if System1’s assets are considered especially attractive.

For System1’s independent shareholders, the bidder’s existing position raises the importance of price discipline. Brave Bison acquired its stake at a lower blended valuation and would obtain full operational control only by purchasing the remaining shares.

The contest is therefore not simply between two boards. The eventual outcome will depend on whether System1’s independent investors prefer immediate cash and exposure to the enlarged group or continued ownership of a standalone recovery.

What does the latest share-price reaction suggest about the contested transaction?

System1 shares traded around 334 pence during midday trading on July 17, approximately 2.8 per cent above the previous close and 9.5 per cent higher than the July 10 closing price of 305 pence.

The shares were broadly unchanged from their 329 pence close one month earlier, indicating that most of the latest increase occurred after the takeover proposal became public. System1 remained below its 52-week high of 470 pence but almost double its 52-week low of 170.5 pence.

The target’s share price trading above the possible offer implies that investors currently expect improved terms or see greater standalone value. It also means Brave Bison cannot rely on the existing proposal providing an obvious market premium.

Brave Bison shares traded around 88 pence, approximately 3 per cent below their July 10 close and about 12 per cent below their June 17 level. The stock remains within a 52-week range of 49 pence to 102 pence.

The relative performance matters because the offer is predominantly share-based. SYS1’s appreciation and BBSN’s decline have widened the valuation gap from both directions.

For Brave Bison shareholders, the market reaction may reflect concerns about dilution, additional borrowing and the possibility that management will need to raise its proposal. It may also indicate that investors want more detail about quantified synergies before supporting another acquisition.

For System1 investors, the trading premium is not a guarantee of a higher bid. If Brave Bison withdraws and no competing proposal emerges, some takeover-related support could disappear from the share price.

What happens before Brave Bison’s August 7 takeover deadline expires?

Brave Bison must announce a firm intention to make an offer or confirm that it will not proceed by 5pm on August 7 unless the UK Takeover Panel grants an extension.

The bidder can maintain the existing terms, increase the proposal or withdraw. Holding the offer unchanged would require Brave Bison to persuade independent System1 shareholders that the strategic benefits and BBSN equity participation compensate for the limited immediate premium.

An increased proposal could reopen discussions with System1’s board. The critical question would be whether the revised value provides a genuine control premium while remaining financially attractive for Brave Bison shareholders.

System1 must meanwhile demonstrate that its confidence is supported by more than one strong half-year. Evidence of continued platform growth, delivery from the large US contract and improved EBITDA margins would strengthen the board’s position.

Brave Bison must provide greater clarity on its proposed credit facility, integration costs, management structure and achievable synergies. The £79 million revenue and £14 million adjusted EBITDA illustration is strategically useful but insufficient on its own to determine how value would be divided.

The current standoff leaves both companies exposed. Brave Bison risks overpaying or damaging its own share price if it raises the bid too aggressively. System1 risks losing an available exit if its recovery fails to meet expectations.

What are the key takeaways from System1’s rejection of Brave Bison’s proposal?

• Brave Bison’s revised proposal offers 68 pence in cash and 2.7553 BBSN shares for each System1 share.
• The proposal valued System1 at £43.1 million and 317 pence per share using Brave Bison’s July 10 market price.
• System1 says the terms represented only a 4 per cent premium and did not include a meaningful premium for control.
• Subsequent weakness in BBSN shares reduced the live value of the proposal to approximately 310 pence per SYS1 share.
• System1 shares traded around 334 pence on July 17, placing the market price above the indicative offer.
• System1 reported FY26 revenue of £37 million, adjusted EBITDA of £3.7 million and year-end cash of £12.4 million with no debt.
• The target’s second-half revenue was 16 per cent above the first half, supporting management’s recovery argument.
• Brave Bison already owns approximately 28 per cent of System1 at a blended entry price of about 242 pence per share.
• Brave Bison’s £79 million revenue and £14 million EBITDA presentation annualises stronger second-half periods and is not an audited combined result.
• Brave Bison must announce a firm offer or withdraw by 5pm on August 7 unless the deadline is extended.