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MGI - MEDIA AND GAMES INVEST SE

(M8G)
  Report
Delayed Xetra  -  11:35:31 2023-01-27 am EST
1.610 EUR    0.00%
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Correction of the release from 16/01/2021, 00 :26 CET/CEST - Media and Games Invest entered into an agreement to acquire KingsIsle Entertainment Inc. for USD 126m plus earn-outs. In this context, Oaktree is subscribing for a EUR 25m share issue.

01/16/2021 | 09:07am EST
Correction of the release from 16/01/2021, 00:26 CET/CEST - Media and Games Invest entered into an agreement to acquire 
KingsIsle Entertainment Inc. for USD 126m plus earn-outs. In this context, Oaktree is subscribing for a EUR 25m share 
issue. 
January 16, 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 yesterday 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 11,676,241 new 
ordinary MGI shares at a price of EUR 2.14 which corresponds to a discount of 4% 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. 
 
 
TRANSACTION OVERVIEW 
 
Pro Forma Financials Jan - Sep 2020 (unaudited) 
 
                                                          Combined 
mEUR               MGI Group (IFRS) KingsIsle (US Gaap)1 
                                                          Pro Forma2 
Revenue            92               18                    109 
adj. EBITDA        19               12                    31 
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 USD126 million and three earn out levels which could result in USD84 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 11,676,241 new ordinary MGI shares at a price EUR

2.14 which corresponds to a discount of 4% on the average closing share price on Xetra of the last twenty trading

days. Oaktree will hold post capital increase approximately 10 percent of the MGI shares on a fully diluted basis

(In the previous ad-hoc notification published on January 16, 2021, 00:26 CET, the number of shares, and the

respective share price were not reported correctly). 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 11,676,241 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 10 percent of MGI.

CONFERENCE CALL FOR INVESTORS, ANALYSTS AND THE MEDIA

Event date

Tue, 2021-01-19 - 11:00 CET

Weblink

https://tv.streamfabriken.com/press-conference-january-2021

Participant dial in number (NOTE: PIN code needed for participants)

SE: +46 856642651 UK: +44 3333000804 US: +1 6319131422 DE: +49 6913803430

Participant Pin code

21060690#

Responsible parties

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:

Remco Westermann

Chairman of the Board and CEO

+49 40 411 885206

Sören Barz

Head of Investor Relations

+49 170 376 9571

soeren.barz@mgi.group, info@mgi.group www.mgi.group

Jenny Rosberg, ROPA, IR contact Stockholm

Phone: +46707472741

Mail: Jenny.rosberg@ropa.se

Axel Mühlhaus / Dr. Sönke Knop, edictor, IR contact Frankfurt

Phone: +49 69 9055 05 51

Mail: mgi@edicto.de

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; info@fnca.se, +46-8-528 00 399.

Important information

(MORE TO FOLLOW) Dow Jones Newswires

January 16, 2021 09:06 ET (14:06 GMT)

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Financials
Sales 2022 322 M 350 M 350 M
Net income 2022 17,3 M 18,8 M 18,8 M
Net Debt 2022 295 M 320 M 320 M
P/E ratio 2022 13,7x
Yield 2022 -
Capitalization 241 M 262 M 262 M
EV / Sales 2022 1,66x
EV / Sales 2023 1,50x
Nbr of Employees 800
Free-Float 69,7%
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Number of Analysts 5
Last Close Price 1,61 €
Average target price 4,53 €
Spread / Average Target 181%
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Managers and Directors
Remco Westermann Executive Chairman & Group Chief Executive Officer
Paul Echt Group Chief Financial Officer
Jens Knauber Group Chief Operating Officer
Jens-Christian Fritz Group Chief Investment Officer
Sonja Lilienthal Chief Investment Officer
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