GiG has signed a Share Purchase Agreement with Betsson for the divestment of GiG’s B2C assets which include the operator brands Rizk, Guts, Kaboo and Thrills. The agreement will see Betsson become a long term partner of GiG, generating revenues to GiG’s Platform Services.Expected completion of the transaction is mid April 2020, giving time for the compulsory regulatory approvals from merger control and gaming authorities.
News of the Share Purchase Agreement was accompanied with GiG’s 2019 Financial update which showed full year 2019 revenues were €123.0m (€29.4m in Q4 2019) with an EBITDA of €14.1m (€4.8m Q4 2019), assuming B2C as continued operations. The isolated B2C full year 2019 revenues were €79.0m (€19.0m in Q4 2019) with a full year 2019 EBITDA of €8.1m (€4.1m in Q4 2019). The divestment of the B2C vertical will lead to a write-down of the remaining book value of the B2C assets and related goodwill, an impairment will be recognised in the fourth quarter 2019.
With the divestment of the B2C vertical, full year 2020 revenues are expected in the range of €70 – 75 million, with an EBITDA expected in the range of €14 – 17 million, including, for comparison, B2C as continued operations until completion of the transaction.
On the day of closing, Betsson will pay €31m, consisting of a €22.3m cash payment for the acquisition, plus a prepaid platform fee of €8.7m. GiG will use the proceeds to repay the company’s SEK300m ($31m) 2017 – 2020 bond.Betsson offers online casino, proprietary sportsbook and other online games in a multi-brand strategy via gaming licences in twelve countries in Europe and Central Asia.
Betsson has commited to keep the brands operational on GiG’s platform for a minimum of 30 months. For the first 24 months, Betsson will pay a premium platform fee based on NGR generated. Based on the expected platform fees, the total value of the transaction is estimated at approximately €50m.
Pontus Lindwall, Chief Executive Officer of Betsson AB, said: “We believe this deal offers a good opportunity for Betsson to consolidate, create synergies and apply our core B2C skills and marketing insights to scale these assets to their true potential. The agreement with GiG further strengthens and expands Betsson’s outreach and growth potential for its proprietary sportsbook and payments platforms in the B2B market.
Betsson has significantly invested in the development of its sportsbook and now delivers a powerful offering. A key strategy is to grow our sportsbook with B2B customers and I am excited to collaborate with GiG as a distribution channel. We share the same passion for sports betting and providing a player environment which is unique, entertaining and safe.”
The sale of the B2C vertical is a result of GiG’s strategic review, initiated in November 2019, leading to an evolved strategic direction to reduce complexity and improve efficiency. By divesting the B2C vertical, GiG will free up resources, enabling full dedication on driving and growing its B2B business, securing stable and sustainable earnings and profit margins. GiG sees a large and sustainable addressable market for its platform business as the regulation of the iGaming industry continues and is well positioned with the omni-channel platform offering to capitalise on the continued digital transformation of the worldwide gambling market.
GiG has, as part of the strategic review, taken a decision to make its technical platform sportsbook agnostic, and partner with other sportbook providers to offer the best solutions to its customers. Betsson’s sportsbook solution is intended to be integrated on GiG’s platform-offering. Both GiG and Betsson will gain strategic advantage in having the possibility to sell their respective B2B solutions in an environment without conflict of their own B2C brands.
In order to keep the strategic position for its own proprietary sportsbook, GiG will seek joint ventures or other constellations with partners to release the true asset value of the sportsbook and to secure external long term funding. The ambition is to gradually grow with existing and new long term partners, including the US market. GiG is one of the few B2B providers present with omni-channel online gambling services in multi-state jurisdictions in the US.
Richard Brown, Chief Executive Officer of GiG, commented: “I am very excited about this transaction as it provides multiple upsides to GiG. While putting the Company in a financially sustainable position, it gives us the ability to focus on where we see real long term shareholder value. This transaction serves as a strategic focusing of the Company’s efforts towards the B2B segment. Offering both B2C and B2B services had synergies in the past, however, the current conflicting priorities of the two business areas, and increased complexity in the market, have lessened the potential offering on both fronts and our ability to sign new customers.
I am delighted to retain our brands on the platform and in the process, adding Betsson as a partner as we share the same ambition of responsibility for all stakeholders, safe play for the end user, and an entertaining user experience. I am certain that together with their speciality, focus and strong track record on driving B2C growth, it will be a fruitful partnership. Additionally, the planned integration of Betsson’s sportsbook into our platform offering, not only provides cost saving synergies, it also allows us to offer one of the most well-renowned European sportsbooks to our current and future B2B partners. We are excited to support Betsson’s growth of the brands we have built and now look forward to GiG next chapter as a specialist iGaming B2B provider“.
GiG is in dialogue with its largest bondholders and will seek consent from its bondholders to extend the repayment of the 2017 – 2020 bond from the maturity date in March 2020 until 22 April 2020. Written resolutions for the two bonds will commence shortly, and GiG has received voting undertakings from investors representing around 53 per cent of the outstanding volume in the 2017 – 2020 bond, and around 46 per cent of the outstanding volume in the 2019 – 2022 bond. As compensation for the extension of repayment date in the 2017- 2020 bond, bondholders in said bond will receive a consent fee of 0.35% of the nominal amount.
The divestment comes days after Enteractive signed a deal which will see GiG’s brands Rizk, Guts and Kaboo integrate with Enteractive’s reactivation platform. Mikael Hansson, Enteractive Founder and CEO, said: “We are delighted that GIG has selected us to assist them in further strengthening their focus on their great B2C brands Rizk, Guts and Kaboo. We look forward to helping them achieve their targets through the deployment of our tools.”