DGAP-Adhoc Media and Games Invest entered into an agreement to acquire U.S. game developer KingsIsle Entertainment Inc. for a consideration of up to USD 126 million plus earn-outs on a cash- and debt-free basis. In this context, funds advised by Oaktree Capital Mana
DGAP-Ad-hoc: Media and Games Invest plc / Key word(s): Takeover
Disclosure of inside information according to Article 17 MAR of the Regulation (EU) No 596/2014
Media and Games Invest entered into an agreement to acquire U.S. game developer KingsIsle Entertainment Inc. for a consideration of USD 126 million plus earn-outs on a cash- and debt-free basis. In this context, funds advised by Oaktree Capital Management participated in the transaction by subscribing to a EUR 25 million share issue.
January 15, 2021 - Media and Games Invest ("MGI" or the "Company", ISIN: MT0000580101; Ticker M8G; Nasdaq First North Premier Growth Market and Scale Segment Frankfurt Stock Exchange), has today at 23:45 CET entered into an agreement with the shareholders of KingsIsle Entertainment Inc. ("KingsIsle") to acquire 100 percent of the shares of KingsIsle (the "Transaction") for a fixed cash consideration of USD 126 million on a cash- and debt- free basis (the "Consideration") plus up to USD 84 million that may be paid to the sellers as earn-out payment (the "Earn-Out Consideration"), dependent on the level of future revenues. All consideration shall be paid in cash. KingsIsle, based in Austin, Texas, is a leading game developer and publisher of the Online PC Games Wizard101 and Pirates 101 which have very loyal communities. As part of the Transaction, MGI has resolved on a directed share issue of 11,111,111 new ordinary MGI shares at a price of EUR 2,25 which corresponds to a premium of 1.5% on the average closing share price on Xetra of the last twenty trading days. The share issue is directed to funds advised by Oaktree Capital Management and will generate proceeds of EUR 25 million.
The Transaction is transformative for MGI as it is expected to materially increase the size and profitability. Given the stable revenues and high EBITDA margin that the successful game Wizard101 generates, it will further strengthen the quality of earnings in the digital games segment.
On a proforma basis MGI's EBITDA* would have been increased by app. 60 percent as a result of the acquisition for the first nine month of 2020. MGI Group generated EUR 19 million and KingsIsle EUR 12 million of adjusted EBITDA during the first nine months 2020. The adjustments made for KingsIsle include a reduction of actual revenue and EBITDA to eliminate favorable revenue developments related to Covid-19 in the earlier part of 2020.
Pro Forma Financials Jan - Sep 2020 (unaudited)
|mEUR||MGI Group (IFRS)||KingsIsle (US Gaap)1||
|adj. EBITDA Margin||21%||66%||28%|
Note (1): Carve out of mobile business not related to Wizard and Pirate 101 and adjusted to pre Covid MMO revenue growth rates from 2019 applied for Jan - Sep 2020 while full operating expenses from the MMO business of 2020 have been included. Note (2) Numbers may not add up due to rounding
- The Transaction is in line with MGI's defined strategy of seeking highly accretive acquisitions which will strengthen the long term profitability and help to create a stronger position in
online PC and mobile games.
- FY 2021 revenue guidance for KingsIsle comprises expected revenues of EUR 25 million ("Revenue Guidance") and an expected adjusted EBITDA of EUR 17
million (the "EBITDA Guidance"). The resulting 68 percent EBITDA margin is expected to be achieved by combining the attractive size of the games with MGI's highly
efficient cost structure.
- MGI's combined group EBITDA margin grows on a pro forma Jan - Sep 2020 basis from 21 percent to 28 percent post the Transaction. Given the strong track record of Wizard101, we expect to
generate higher & more stable cash flows from the free-to-play model with the loyal communities for existing IPs.
- The fixed Cash Consideration of USD 126 million represents an EV/EBITDA multiple of 6.0x based on the EBITDA Guidance. The Transaction is immediately accretive for the MGI
shareholders based on this multiple combined with an expected increase of EPS.
- Taking into account the Earn-Out Consideration, the EV/EBITDA multiple may increase to a range of 5.8x - 7.3x of the EBITDA Guidance. This assessment is based on an increased EBITDA and
includes the incremental EBITDA that may occur from a higher revenue base should an earn out become payable.
- Post transaction, the net leverage ratio is at the upper end of the stated target range of 2-3x, while the lower end is planned to be reached within 12-18 months due to stronger Free-Cashflow
generation combined with an increasing EBITDA.
- The Total Consideration on a cash- and debt- free basis is divided into a fixed component comprising four installments totalling $126 million and three earn out levels which could result in $84 million of additional payments:
Closing Consideration Payment
- USD 63 million will be paid at the closing of the Transaction
Deferred Consideration Payments
- USD 25,2 million will be paid in cash on or before 30 June 2021,
- USD 12,6 million will be paid in cash on or before 31 December 2021 and
- USD 25.2 million will be paid in cash on or before 30 June 2022
Earn Out Consideration Payments
- USD 10 million if the full year gross revenues in 2021 ranges between USD 30 million and USD 35 million, in cash payable until 31 March 2022.
- USD 32 million if the full year gross revenues in 2021 is more than USD 35 million, in cash payable until 30 June 2022.
- USD 42 million if the full year gross revenues in 2021 exceeds USD 55 million, in cash payable on 31 December 2022.
- EUR 25 million (app. USD 31 million) of the Consideration paid at closing (USD 63 million) will be paid from proceeds received from Oaktree in exchange for the issuance of 11,111,111 new ordinary MGI shares at a price EUR 2.25 which corresponds to a premium of 1.5% on the average closing share price on Xetra of the last twenty trading days. Oaktree will hold post capital increase approximately 9 percent of the MGI shares on a fully diluted basis. Oaktree has signed a six month lock-up agreement and typcially holds investments for 3 to 5 years. The share issue has been resolved by the Board of Directors on the basis of the authorization of the Extraordinary General Meeting on 25 July 2019 and under exclusion of pre-emptive rights.
- The fixed Deferred Consideration of USD 63 million will be paid over the coming 18 months using liquidity and cash flow of the MGI Group.
- In order to bridge the time between the capital increase in cash with Oaktree and the new share issue, Remco Westermann, through his investment vehicle Bodhivas GmbH, will deliver 11,111,111 million shares by way of a shareloan to Oaktree and will receive the same number of shares back after the new share issue.
- Closing of the transaction is expected for 25.01.2021.
As described above, to finance part of the Transaction, MGI agreed with the U.S. investment company Oaktree Capital Management, LP ("Oaktree") on a directed share issue. Oaktree will become a strategic minority anchor investor of MGI with a multi-year investment horizon.
The reason for the exclusion of the shareholders' pre-emptive rights is to ensure the most time- and cost-efficient financing of the transaction. Furthermore, the Company found an anchor investor
in Oaktree, which is very familiar with MGI and the European games and media industry and supports the management's goals and strategy of making further strategic investments in the games sector
and in the media sector. Following the share issue, Oaktree will hold approximately 9 percent of MGI.
* Earnings before interest, taxes, depreciation and amortization as defined on page 13 of the Media and Games Invest plc Q3 2020 Quarterly Report.
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This information is such information Media and Games Invest plc is obliged to make public in accordance with the (EU) Market Abuse Regulation 596/2014. The information in this release has been made public through the agency of the responsible persons set out below for publication at the time stated by MGI's news distributor EQS Newswire at the publication of this release. The responsible persons below may be contacted for further information.
For further information, please contact:
Chairman of the Board and CEO
+49 40 411 885206
Jenny Rosberg, ROPA, IR contact Stockholm
Axel Mühlhaus / Dr. Sönke Knop, edictor, IR contact Frankfurt
Phone: +49 69 9055 05 51
About Media and Games Invest plc
Media and Games Invest plc (MGI), is a fast-growing and profitable company operating in the digital games sector with a strong supportive media unit and a focus on North America & EMEA. The company combines organic growth with value-accretive acquisitions, delivering strong and sustainable earnings growth. Since 2014 the MGI Group has successfully acquired more than 30 companies and assets which are integrated onto our platform, exploiting efficiency-enhancing technologies such as the cloud. The Company's shares are listed on Nasdaq First North Premier Growth Market in Stockholm and the Scale segment of the Frankfurt Stock Exchange.
The Company's certified advisor on Nasdaq First North Premier Growth Market is FNCA Sweden AB; email@example.com, +46-8-528 00 399.
This release does not constitute an offer, or a solicitation of any offer, to buy or subscribe for any securities in MGI in any jurisdiction, neither from MGI nor from someone else.
This release does not constitute or form part of an offer or solicitation to purchase or subscribe for securities in the United States. The securities referred to herein may not be sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There is no intention to register any securities referred to herein in the United States or to make a public offering of the securities in the United States. The information in this release may not be announced, published, copied, reproduced or distributed, directly or indirectly, in whole or in part, within or into Unites States, Australia, Canada, Hong Kong, Japan, New Zealand, Singapore, South Africa, South Korea, Switzerland or in any other jurisdiction where such announcement, publication or distribution of the information would not comply with applicable laws and regulations or where such actions are subject to legal restrictions or would require additional registration or other measures than what is required under applicable EU law. Actions taken in violation of this instruction may constitute a crime against applicable securities laws and regulations.
This release contains forward-looking statements that reflect the Company's intentions, beliefs, or current expectations about and targets for the Company's and the group's future results of operations, financial condition, liquidity, performance, prospects, anticipated growth, strategies and opportunities and the markets in which the Company and the group operates. Forward-looking statements are statements that are not historical facts and may be identified by words such as "believe", "expect", "anticipate", "intend", "may", "plan", "estimate", "will", "should", "could", "aim" or "might", or, in each case, their negative, or similar expressions. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurances that they will materialize or prove to be correct. Because these statements are based on assumptions or estimates and are subject to risks and uncertainties, the actual results or outcome could differ materially from those set out in the forward-looking statements as a result of many factors. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this release by such forward-looking statements. The Company does not guarantee that the assumptions underlying the forward-looking statements in this release are free from errors and readers of this release should not place undue reliance on the forward-looking statements in this release. The information, opinions and forward-looking statements that are expressly or implicitly contained herein speak only as of its date and are subject to change without notice. Neither the Company nor anyone else undertake to review, update, confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this release, unless it is so required by law or applicable stock exchange rules.
Information to distributors
Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the shares in MGI have been subject to a product approval process, which has determined that such shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, Distributors should note that: the price of the shares in MGI may decline and investors could lose all or part of their investment; the shares in MGI offer no guaranteed income and no capital protection; and an investment in the shares in MGI is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Directed Share Issue.
For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the shares in MGI.
Each distributor is responsible for undertaking its own target market assessment in respect of the shares in MGI and determining appropriate distribution channels.
16-Jan-2021 CET/CEST The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases.
Archive at www.dgap.de
|Company:||Media and Games Invest plc|
|St. Christopher Street 168|
|VLT 1467 Valletta|
|Phone:||+356 21 22 7553|
|Fax:||+356 21 22 7667|
|Listed:||Regulated Unofficial Market in Berlin, Dusseldorf, Frankfurt (Scale), Munich, Stuttgart, Tradegate Exchange; FNSE|
|EQS News ID:||1161089|
|End of Announcement||DGAP News Service|
1161089 16-Jan-2021 CET/CEST