Fluid Music announces proposed acquisition of Mood Media Group for (euro)160
million and related financing


Mood Media operates in 35 countries worldwide, employs over 550 full time employees and boasts annual revenue over US$130 million per year with annual EBITDA over US$31 million per year

TORONTO, May 5 /CNW/ - Fluid Music Canada, Inc. (TSX:FMN) ("Fluid") announced today that it has entered into a definitive purchase agreement to acquire all of the issued and outstanding shares and debt of Mood Media Group SA ("Mood Media") in consideration for (euro)160 million (approximately US$206 million) (the "Mood Media Acquisition"). Fluid has entered into a bought deal agreement with BMO Capital Markets in respect of a private placement of subscription receipts (the "Offering").

The Mood Media Acquisition will be completed on or before June 4, 2010 at which time Fluid will acquire all of Mood Media's outstanding shares and debt in consideration for (euro)160 million. On closing, Fluid will pay (a) (euro)142 million in cash to Mood Media shareholders, (b) (euro)8 million in either, at the option of Mood Media shareholders, (i) Fluid common shares based on a price of C$1.60 per common share, which common shares shall be subject to a four month and a day hold period, or (ii) a convertible promissory note due four months after the closing of the Mood Media Acquisition, which can be repaid in cash or, at Fluid's option, Fluid common shares based on a price equal to the five day volume weighted average trading price of the Fluid common shares on the Toronto Stock Exchange (the "TSX") at such time, and (c) a convertible promissory note in the amount of (euro)10 million which will be due on December 1, 2010 and can be repaid in cash or, at Fluid's option, Fluid common shares based on a price equal to the five day volume weighted average trading price of the Fluid common shares on the TSX at such time.

Lorne Abony, Chairman and CEO of Fluid, remarked "The acquisition of Mood Media represents an enormous leap forward for Fluid, on multiple fronts. Mood Media is categorically the most advanced solutions provider for the in-store media market, a large and lucrative market ripe for disruption with tremendous long-term growth potential as advertisers and retailers seek more efficient modes of communication and a higher return on their marketing spend. With an installed retail and hospitality network of approximately 116,000 locations, an unparalleled product line, and strong management and industry know-how, we believe Mood Media is exceptionally well-positioned to benefit from this shift in the retail marketplace.

Mood Media is a market-leading business, with a track record of robust growth and profitability. Over the last two completed fiscal years, Mood Media averaged annual revenue of US$130 million and annual EBITDA of US$31 million. Mood Media is the largest in-store media operator in Europe, and leader in the French, UK, Benelux, German and Australian markets, with strong positions in emerging markets in Asia and Eastern Europe. We expect that senior management of Mood Media will all remain with the merged entity, which from our perspective speaks volumes of the strength of the combined entity and will help ensure consistency on a go forward basis.

We believe that Fluid can drive additional growth at Mood Media through the use of its rights included music, a unique asset to Fluid, which will allow the combined entity to aggressively cut costs, grow margins and pursue new business. Additionally, Fluid's Internet and mobile enabled delivery platform will help Mood Media cut meaningful content delivery costs, expand margins and build upon Mood Media's already impressive product line thus enabling it to reach a wider range of potential customers. By leveraging Fluid's all rights included music catalogue, Mood Media will reap the benefits of a substantial cost advantage over its competitors globally.

Furthermore, we believe that Mood Media's suite of visual media solutions will be extremely well received in the North American market, where to date no one has yet to capture market share in this large and very profitable segment. Mood Media has developed custom, unique visual solutions for many of the world's best-known brands, and we believe that there is a significant opportunity to extend their world-class solutions and visual solutions competency in North America and beyond.

Beyond growth opportunities at Mood Media, meaningful synergies exist between Mood Media and Fluid's other operating businesses. Mood Media's international customer base and network of regional offices and understanding of local markets creates an unprecedented opportunity to grow Fluid's Point-of-Purchase retail ("POPR") business in new, international markets. We believe strongly that our POPR division (formerly known as "Somerset Entertainment") which until now has been primarily North American focused has great growth potential in large and relatively un-penetrated markets where Mood Media is a clear market leader. The benefit of Mood Media's worldwide presence will transform our POPR business into a global force.

Management believes that there are additional operational and organizational synergies to be realized through bringing Mood Media together with Fluid which should yield incremental operating profit. We are excited at the prospect of completing this transformative acquisition and aggressively growing the combined business."

Jean-Marie Noizet, Chairman and Founder of Mood Media commented, "We are delighted to be merging with Fluid Music. With its all rights included music catalogue and growing background music business in North America, we believe that Fluid is an ideal, strategic partner for growing a sensorial marketing business in the retail sector in North America and new markets. Mood Media and Fluid share a similar vision of international growth for the merged entity. The new business will be well-positioned to capitalize on the significant long-term growth opportunities of the in-store media market. We are eager to work with Fluid to maximize the strengths of the combined business by exploiting the abundant synergies that exist in product, markets, and customers."

The Offering consists of the private placement of 37,500,000 subscription receipts at a price of C$1.60 per subscription receipt for aggregate proceeds of C$60 million. Each subscription receipt will entitle the holder thereof to acquire one common share of Fluid without payment of additional consideration.

The gross proceeds of the Offering will be held in escrow and released to Fluid to complete the Mood Media Acquisition following the satisfaction of certain release conditions, including, receipt of all required approvals, including the shareholder approval referred to below, and consents and the satisfaction of all conditions precedent of the Mood Media Acquisition, other than payment of the purchase price thereof (the "Release Conditions"). In the event that the Release Conditions are not satisfied on or before 5:00 p.m. (EST) on the date that is 60 days following the closing of the Offering or the Mood Media Acquisition is abandoned or terminated prior thereto, holders of subscription receipts shall be entitled to receive, in exchange for such holders' subscription receipts, an amount equal to the aggregate purchase price paid for their subscription receipts, together with such holder's pro rata share of earned interest thereon.

The Offering is being undertaken to satisfy a portion of the purchase price for the Mood Media Acquisition and it is anticipated that the closing of the Offering will occur on or about May 10, 2010. The balance of the purchase price for the Mood Media Acquisition will be satisfied from cash on hand, a new senior credit facility from a Canadian chartered bank and new mezzanine financing.

The new senior credit facility will be a three year facility for US$100 million of which US$15 million will be a working capital revolver and US$85 million will be a term loan which, together with the mezzanine financing discussed below, will be used to satisfy a portion of the purchase price and repayment of debt in connection with the Mood Media Acquisition. Interest rates will be customary for transactions of this nature. The obligations of Fluid under the senior credit facility will be secured by a first ranking lien on all of the assets of Fluid and certain of its subsidiaries.

The new mezzanine financing will be a three and a half year facility for US$41 million. Interest rates will be customary for transactions of this nature and the obligations of Fluid under the mezzanine financing will be secured by a second ranking lien on all of the assets of Fluid and certain of its subsidiaries. The lenders of the new mezzanine financing will receive compensation warrants which can be exercised for 4,100,000 common shares of Fluid at an exercise price of C$1.60 per common share for a period of 42 months from the date of issuance (the "Compensation Warrants").

Pursuant to the terms of the indenture dated November 16, 2009 governing the convertible debentures (the "Debentures") of Fluid, a waiver of certain negative covenants is required from holders of Debentures holding in excess of 50% of the aggregate principal amount of Debentures outstanding to proceed with the equity and debt financings (the "Financing Waiver"). Currently, there is C$27,561,000 principal amount of Debentures outstanding with a conversion rate of 334 common shares per C$1,000 of Debentures. In connection with the Financing Waiver, the terms of the Debentures will be amended on closing of the Mood Media Acquisition to provide for: (a) an increase in the principal amount of Debentures by 10% such that each C$1,000 principal amount of Debentures will represent C$1,100 principal amount of Debentures; (b) an increase in the interest rate on the Debentures from 8% to 10%; and (c) if the Debentures are not redeemed within 75 days following the closing of the Mood Media Acquisition, an increase in the conversion rate to 679 common shares per C$1,100 of Debentures which represents an effective conversion price of approximately C$1.47 per common share (collectively, the "Debenture Amendments"). As a result of the Debenture Amendments, up to an additional 9,508,886 common shares of Fluid may be issuable upon conversion of the Debentures.

There will be no new insiders created by the Mood Media Acquisition, the Offering, the Debenture Amendments or the issuance of Compensation Warrants. Investors in the Offering do not include insiders of Fluid. The shareholders of Mood Media, the holders of Debentures and the lenders under the mezzanine financing are all arms' length to Fluid.

Fluid currently has 63,153,418 common shares issued and outstanding on a non-diluted basis. The TSX has conditionally approved the Mood Media Acquisition, the Offering, the Debenture Amendments and the Compensation Warrants subject to meeting all of the requirements of the TSX, including, without limitation, that no more than 63,108,556 Fluid common shares be issued in total pursuant to all components of the transaction, the receipt of shareholder approval (as discussed below) and compliance with the other requirements of the TSX. If the maximum number of common shares are issued pursuant to the Mood Media Acquisition, the Offering, the Debenture Amendments and the Compensation Warrants, this will result in the issuance of 63,108,556 common shares representing an increase equal to approximately 99.9% of the currently outstanding common shares of Fluid.

The Mood Media Acquisition, the Offering, the Debenture Amendments and the Compensation Warrants will result in the issuance of greater than 25% of the currently outstanding common shares of Fluid. The rules of the TSX require that Fluid obtain approval of the Mood Media Acquisition, the Offering, the Debenture Amendments and the Compensation Warrants from the holders of a majority of the common shares. However, the rules of the TSX also provide that such approval may be obtained in writing from shareholders without the requirement to convene a shareholders' meeting for such purposes, and Fluid intends to rely on this exemption in connection with obtaining the necessary shareholder approval for the Mood Media Acquisition, the Offering, the Debenture Amendments and the Compensation Warrants.

Fluid will be required to pay a break fee to Mood Media of approximately C$10 million if the Mood Media Acquisition agreement is terminated under certain circumstances.

On March 15, 2010, Fluid announced its intention to list its common shares on the AIM of the London Stock Exchange. It remains Fluid's intention to list its common shares on AIM but anticipates that the listing will not be completed until the second half of 2010 as a result of the Mood Media Acquisition.

About Fluid Music Canada, Inc.

Fluid is a leading private label music aggregation and distribution company, providing music solutions to both business and individual consumers. Fluid has compiled a music library of five million songs from a diverse network of producers, including major label, independent and emerging artists. Trusonic, Fluid's wholly owned subsidiary, is a leader in Internet-delivered background music and messaging to the retail and hospitality sectors in North America. Fluid's retail point of purchase division, Somerset Entertainment Ltd. is the leading North American producer and distributor of specialty music sold through non-traditional retailers using interactive displays. It has an active network of over 24,600 interactive displays installed in 18,800 locations in North America. Somerset's customers include leading retailers such as Wal-Mart, Target, Costco, Bed Bath & Beyond and Shoppers Drug Mart. For further information about Fluid, please visit www.fluidmusic.com.

Mood Media Group SA

Mood Media provides in-store audio, video, media and marketing solutions to a wide range of businesses including specialist retailers, department stores, supermarkets, financial institutions and fitness clubs as well as hotels and restaurants. In total, the Mood Media group supports over 650 international brands in more than 116,000 commercial sites across 35 countries throughout Europe, Australia and Asia. Mood Media's services have a direct impact on consumer purchasing decisions at the point of purchase which makes in-store media a highly effective marketing tool. In-store media services enhance branding in real-time, drive impulse purchases and increase footfall by improving the shopping experience for customers.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements. The statements that are concerning Fluid's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of Mood Media, its subsidiaries and Fluid are forward-looking statements. The words "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would" and similar expressions and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to important assumptions, including the following specific assumptions: the ability of Mood Media and Fluid to meet their respective revenue targets; the ability to achieve cost synergies; the completion of the Mood Media Acquisition in accordance with its terms; general industry and economic conditions; changes in Mood Media's and Fluid's relationships with their customers and suppliers; pricing pressures and other competitive factors; and changes in regulatory requirements affecting the businesses of Mood Media and Fluid. Fluid has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. While Fluid considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect.

Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: failure to obtain shareholder approval of the Mood Media Acquisition, the Offering, the Debenture Amendments and the Compensation Warrants; general economic and business conditions; financing risk; risks inherent in the business of operating Mood Media and Fluid, including the inability to attract and retain qualified employees; competition; disruptions in business operations; interest rate and foreign currency fluctuations; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; and liability and other claims asserted against Fluid. Furthermore, the amounts set out in this press release are based on foreign currency exchange rates in effect on April 11, 2010 and there is no assurance that such foreign currency exchange rates will not fluctuate in a manner that is adverse to Fluid. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

All of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Fluid. Forward-looking statements are given only as at the date hereof and Fluid disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.


For further information: For further information: Lorne Abony, Chairman and Chief Executive Officer, Fluid Music, (416) 510-2800

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