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Embracer will hold a webcast presentation for investors, analysts and media on
The Contemplated Transaction
- The day one consideration is approximately EUR 2.75[1] billion in total.
EUR 350 million would be paid to the main shareholder, PAI, and certain other minority shareholders in newly issued Embracer B shares (the "Closing Consideration Shares") and approximatelyEUR 2.4 billion in cash and debt refinancing.Asmodee's other minority shareholders would sell the majority of their shares upfront for cash, and retain a minority interest of approximately 4 percent of the shares which would be subject to put and call options, exercisable in year 2, 5 and 6, pursuant to which such shareholders could receive a maximum of 40,984,678[2],[3] newly issued Embracer B shares (the "Additional Consideration Shares").- If the put option is exercised by the current shareholders of
Asmodee , and subject to clearance by all applicable antitrust authorities, the transaction would be expected to close the first half of the calendar year 2022. Asmodee's CEOStéphane Carville together with his management team would continue to lead the new operating group.Asmodee would continue to operate as before the transaction with no reorganization expected driven by the transaction.-
The acquisition would be financed by cash at hand, available credit facilities and new credit facilities from
Nordea Bank , SEB andSwedbank . The new unsecured credit facility would consist of aSEK 6 billion term loan with expiry in 30 months, as well asSEK 12 billion in bridge loans. Embracer expects its average interest rate on utilized gross debt in the group would be less than 1.00 percent going forward. Embracer would expect to refinance the bridge loans in the next 12 months, whereas the term loan would add long term strategic flexibility. Post-closing of the acquisition ofAsmodee , Embracer would expect to have more thanSEK 9 billion in liquid funds to support investments in organic growth and enable additional acquisitive growth.
Key Rationale
- If the transaction is completed,
Asmodee would become the ninth operating group of Embracer, moving Embracer towards becoming a leading independent global gaming eco-system and becomingEurope's largest gaming group. - Strong strategic and cultural fit between the companies. The combined new group would on pro forma basis have more than 11,300 employees and contracted employees across more than 50 countries. The new group would have 108 own game development studios and more than 560 owned IPs and brands.
- The acquisition adds, immediately accretive to shareholders, approximately 30 percent in forecasted Operational EBIT with approximately 7.5 percent dilution of outstanding shares (based in the number of shares today including the shares that would be issued as part of the purchase price and put option).
-
Increased financial scale and diversification of Embracer group. The combined group would have a forecasted Operational EBIT range of
SEK 9.0-11.0 billion during FY 22/23 andSEK 9.8-12.9 billion during FY 23/24[4].
Financial Highlights Asmodee
- Pro forma[5]
Net Sales ofAsmodee for this calendar year is estimated to beEUR 1.1 billion , Pro forma Adjusted EBITDA5,[6]EUR 240 million and Pro forma Adjusted Operational EBIT5,6,[7]EUR 206 million . -
Forecasted Operational EBIT[8] contribution FY22/23 (
March 2023 ) SEK 2,000-2,500 million and FY 23/24 (March 2024 ) SEK 2,300-2,900 million. These forecasts exclude further planned M&A. -
The healthy profitability of
Asmodee is coupled with solid free cash flow generation, driven by a capex-light business model and efficient working capital management processes. HistoricallyAsmodee has yielded a pre-tax free cash flow conversion of approximately 70-80 percent. The transaction is expected to be immediately accretive to FCF per share. Asmodee management expects to have a double digit organic profit growth over the coming five-year period
Background and Rationale
If the transaction is completed, this would mark a transformative step in Embracer's strategy within gaming and entertainment as outlined at the September AGM:
- Creates
Europe's largest gaming group and establishes an important market leading position in board games, a category that is highly complementary to PC, console, VR and mobile games and with appealing long term organic growth outlook. - Offers the opportunity to cross-fertilise IP and strengthen licensing partnerships across PC, console, VR, mobile, board and trading card games.
- Strong foundation for the future development of transmedia IPs.
- Ability to leverage the omni-channel distribution network to drive efficiencies across existing and new markets.
- Providing a proven platform for value-accretive M&A, complemented by a sizeable funnel for future opportunities within board games, trading card games & collectables.
- Shared strong cultural fit, with a similar integrated model operating across the value chain, from IP through to publishing and distribution.
- Enhancing the new Group's strong financial profile, with added diversity, predictability, resilience, and immediate accretion to adjusted earnings per share and free cash flow per share.
If the acquisition is completed, Embracer would onboard one of the market leading independent global players in a large, growing, highly resilient board gaming market with proven experience of creating long-lasting franchises and delivering strong original content. The acquisition would create
Financing
The acquisition would be financed by cash at hand, available credit facilities and new credit facilities from
Embracer would expect to refinance the bridge loans in the next 12 months, whereas the term loan adds long term strategic flexibility. If the acquisition of
At the time of closing, Embracer expects pro-forma net debt of approximately
In order to facilitate the potential acquisition of
Financials
On a preliminary basis, based on Embracer's accounting principles,
The acquisition would, immediately add accretive to shareholders, representing approximately 30 percent in forecasted Operational EBIT with only approximately 7.5 percent dilution of outstanding shares (based in the number of shares today including the shares that would be issued as part of the purchase price and put option).
Increased financial scale and diversification of Embracer group. The combined group will have forecasted an Operational EBIT range of
The healthy profitability of
Total consideration including transaction costs amounts to approximately
Embracer has not completed the detailed valuation analyses necessary to arrive at the final estimates of the fair market value of the assets to be acquired and the liabilities to be assumed in connection with the acquisition of
Issue of Closing Consideration Shares and Additional Consideration Shares and Lock-up[10]
The Closing Consideration Shares would represent approximately 3.8 percent and 2.4 percent of the total number of shares and votes in Embracer, respectively, on a fully diluted basis. By issuing the Closing Consideration Shares, the number of shares and votes would increase by 40,060,091. The share capital would increase by approximately
The Additional Consideration Shares assuming fully earned and when issued would represent 3.9 percent and 2.5 percent of the total number of shares and votes in Embracer, respectively, on a fully diluted basis. If the Additional Consideration Shares would be issued the number of shares and votes would increase by 40,984,678. The share capital would increase by approximately
In total, the Closing Consideration Shares and the maximum Additional Consideration Shares that would be issued together would represent 7.4 percent and 4.8 percent of the total number of shares and votes in Embracer, respectively, on a fully diluted basis. By issuing the Closing Consideration Shares and the Additional Consideration Shares the number of shares would increase by 81,044,769 to 1,096,335,696 and the number of votes would increase by 81,044,769 to 1,697,520,162. The share capital would increase by approximately
The Closing Consideration Shares and Additional Consideration Shares would be issued at a price of
Upon completion of the transaction the board of directors would resolve to issue the Closing Consideration Shares pursuant to authorization granted by a general meeting. The Additional Consideration Shares would be delivered in the future in connection with potential exercise of the put and/or the call option.
Out of the 40,060,091 B shares[11] in Embracer to be paid to PAI and certain other minority shareholders, 50% would be subject to a 12 months lock-up undertaking and 50% would be subject to a 18 months lock-up undertaking.
Completion of the transaction
If the put option is exercised, the transaction would be expected to be completed within six months after which
Extra General Meeting
Embracer will also summon an extra general meeting to add an additional authorization to issue the Closing Consideration Shares. In addition, Embracer's board of directors will also propose a new 10 percent authorization for future needs replacing the current authorization granted by the annual general meeting.
Advisers
Responsible party
The information in this press release constitutes inside information that
For additional information, please contact:
Tel: +46 708 47 19 78
E-mail: lars.wingefors@embracer.com
Tel: +33 1 34 52 19 70
E-mail: carville.s@asmodee.com
Webcast presentation for investors, analysts and media
Representatives from Embracer and
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Important information
The release, announcement or distribution of this press release may, in certain jurisdictions, be subject to restrictions. The recipients of this press release in jurisdictions where this press release has been published or distributed shall inform themselves of and follow such restrictions. The recipient of this press release is responsible for using this press release, and the information contained herein, in accordance with applicable rules in each jurisdiction. This press release does not constitute an offer, or a solicitation of any offer, to buy or subscribe for any securities in Embracer in any jurisdiction, neither from Embracer nor from someone else.
This announcement does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in Embracer's shares. Any investment decision regarding Embracer's shares must be made on the basis of all publicly available information relating to the company and the company's shares. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. This announcement does not constitute a recommendation. Each investor or prospective investor should conduct his, her or its own investigation, analysis and evaluation of the business and data described in this announcement and publicly available information. The price and value of securities can go down as well as up. Past performance is not a guide to future performance.
Forward-looking statements
This press release contains forward-looking statements that reflect the company's intentions, beliefs, or current expectations about and targets for the company's future results of operations, financial condition, liquidity, performance, prospects, anticipated growth, strategies and opportunities and the markets in which the company 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 press 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. Embracer does not guarantee that the assumptions underlying the forward-looking statements in this press release are free from errors and readers of this press release should not place undue reliance on the forward-looking statements in this press 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 Embracer 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 press release, unless it is not required by law or Nasdaq First North Growth Market's rule book for issuers.
[1] Including payment for
[2] Priced at the volume weighted average price of
[3] For the purpose of this press release, the equity price at completion as well as the potential dilution from new shares to be issued in the future in relation with the
[4] The new estimate is a combination of Embracer's Q2 21/22 figures and the new figures for
[5] Based on IFRS standards, includes pro forma adjustments to reflect twelve months of trading for all M&A transactions signed by
[6] Adjusted for non-recurring items, including costs for share based compensation and similar which are cancelled as a consequence of
[7] Operational EBIT reflects EBIT excluding acquisition related amortisations for consistency with Embracer's financial KPI definitions
[8] Based on K3 Swedish GAAP
[9] Adjusted Operational EBIT=Operational EBIT adjusted for non-recurring items, e.g., costs for share based compensation and similar which are cancelled as a consequence of
[10] For the purpose of this press release, the equity price at completion as well as the potential dilution from new shares to be issued in the future in relation with the
[11] Priced at the volume weighted average price of
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