The gambling sector of the United Kingdom is set to experience a major shift. The UK gambling giant, River iGaming has established a new subsidiary, River UK Casino Limited which it has used to acquire a 70% majority stake in the Gaming Realms plc.
This takeover encompasses X Factor Games sites, Pocket Fruity, Britain’s Got Talent Games, and Spin Genie over and above the gambling giant. The takeover shall cost £23.1 million, subject to the approvals by the shareholders. At the conclusion of the takeover, the remaining 30% stake and the flagship Slingo brands shall be held by Gaming Realms.
This 30% stake shall be subjected to a call option and mutual put arrangement. This privilege, as per the sales arrangement, shall be exercised on or before 31st October 2020. It shall further be subjected to the uncapped valuation of around 5.5 times the earnings-before-interest-and-taxes of River UK Casino. The entire privilege shall run for the duration of 12 months preceding the 30 June 2020 deadline.
A press release from the company stated that it shall pay out a minimum of £8.4 million to effect the takeover. It plans to spend half of this amount as soon as the deal is sealed and the remaining half progressively on an earn-out basis. It further anticipates spending yet another £14.7 million on the basis of earn-outs on or before August 31st, 2019.
Gaming Realms CEO, Patrick Southon had this to say:
“This sale is indeed revolutionary. This is because it will grant us the leeway to channel all our resources on matters of international licensing as well as the development of newer gaming contents. This shall subsequently place us in a stronger position as to let us generate further profitable growths in the future.”
In all, River iGaming which is the parent company of the River UK Casino Limited expects to make no less than £1m in annual revenue with the new acquisition. This stems from the profitable nature of the particular business. For this to happen, the acquisition shall have to generate earnings-before-interest-and-taxes of no less than £6 million in the 12-month duration prior to 30 June 2019.
For instance, in the financial year ended 2017, Gaming Realms plc made net gaming revenue to the tune of £13.9m. In the same year, its adjusted profit before tax and the corresponding interest amounted to £2.2m.
During the transition phase, the present management team of the business will oversee the River UK Casino till June 30, 2020. At the same time, River iGaming and Gaming Realms plc will jointly raise a working capital loan facility of around £3 million to fund investments in marketing for the business until at least 30 June 2019.
This loan facility shall be repaid in full no later than 30 June 2020. Of the £3 million, £2.1 million shall be contributed by River iGaming with the remaining £0.9 million by Gaming Realms plc.
With regards to this, Gaming Realms had this to say:
“We plan to spend the first batch of the £4.2m of the sales proceeds to develop new gaming contents and enhance the current platforms. We shall also provide a loan of approximately £0.9m to fund the River UK Casino’s marketing budget as stipulated previously.”
This, the company argues, is consistent with its strategy of channeling its resource base on content developments and international licensing. The final resolution to sell the 70% stake, however, rests with the general meeting and is expected to be endorsed on July 18 in London, United Kingdom.
Given the highly lucrative and competitive nature of the online gambling sector in the United Kingdom, we all wait to see just how much impact this acquisition is going to have.