Proposed Acquisition and Placing

Gaming Realms Plc

 

("Gaming Realms," the "Company," or the "Group")

 

 

Proposed Acquisition of Blueburra Holdings, Placing and Notice of General Meeting

 

 

Gaming Realms, the creator, publisher and marketer of next generation online gaming products, announces that it has conditionally agreed to acquire the specialist eGaming marketing company Blueburra Holdings, the holding company of Digital Blue, for up to £10.5 million. In addition, the Group also announces that is has conditionally raised approximately £6.0 million through the proposed Placing of 18,148,487 new Ordinary Shares at 33 pence per Ordinary Share with new and existing Shareholders.

 

Highlights

 

§ Conditional acquisition to acquire the specialist eGaming marketing company Blueburra Holdings, the holding company of Digital Blue, for up to £10.5 million

§ Initial consideration of £5.0 million to be satisfied by an equal split of cash and new Ordinary Shares issued at 33 pence per share

§ Remaining consideration payable over the next three years, subject to the fulfilment of certain earn-out targets and adjustments

§ up to an additional £2.75 million in cash; and

§ up to an additional £2.75 million to be satisfied by the issue of new Ordinary Shares

§ Placing of 18,148,487 Placing Shares to raise approximately £6.0 million (before expenses) to part fund cash consideration

§ Placing at 33 pence per share, representing a discount of approximately 14.8 per cent. to the closing mid-price of the Company's Ordinary Shares as at 18 August 2014, the last practicable date prior to the date of this announcement

§ The Board believes that the Acquisition is consistent with the Group's long term strategy to increase the combined databases of the Company's subsidiaries and enhance the Group's revenues by focusing on product and marketing initiatives

§ The Company continues to trade in-line with expectations

 

 

Patrick Southon, Chief Executive of Gaming Realms, commented:

 

"The skills and aptitudes of Blueburra Holdings will complement and significantly enhance our overall marketing capabilities when combined with our recent acquisition of Quickthink Media, which has been successfully integrated into the Group. The Acquisition is consistent with our longer term strategy to increase the combined databases of our subsidiaries. Blueburra Holdings will boost our product and marketing initiatives to target the fast growing and overlapping audiences using mobile and tablet platforms which, in turn, will help to accelerate the Group's future revenue growth."

 

Scott Logan, Co-founder of Blueburra Holdings, commented:

 

"Blueburra Holdings marketing approach to optimising player engagement fits well with Gaming Realms's model of generating optimum and maximum player values across multiple platforms. Combining our capabilities and successful brands with those of Quickthink Media will enable the expanded Group to increase the number of real money players and revenue growth.

 

"We are excited to be moving Blueburra Holdings on to the next phase of its development. Our ambitions are aligned with those of Gaming Realms and we believe that the Acquisition will create long term value for the Group."

 

 

 

- Ends -

 

 

Gaming Realms Group Patrick Southon, Chief Executive Officer	+44 (0) 84 5123 3773
Cenkos Securities (Nomad and Broker) Max Hartley Michael Johnson	+44 (0) 20 7397 8900
Bell Pottinger Olly Scott Charles Goodwin	+44 (0) 20 7861 3891

 

 

Introduction

 

Under the terms of the Agreement, the Company has conditionally agreed to acquire the entire issued share capital of Blueburra Holdings and the Company has agreed to pay an initial purchase price of £5.0 million to be satisfied by an equal split of cash and new Ordinary Shares. Subject to the fulfilment of certain earn-out targets and adjustments, an additional up to £5.5 million, satisfied by an equal split of cash and new Ordinary Shares, is payable over the next three years.

 

Gaming Realms has also conditionally placed 18,148,487 new Ordinary Shares at a price of 33 pence per share, to raise proceeds of approximately £6.0 million (before expenses). These funds will be used to satisfy the cash elements of the Acquisition consideration with the balance being used for ongoing working capital.

 

 

Background to and reasons for the Placing and the Acquisition

 

The Placing will provide funding for the initial £2.5 million cash consideration (and a further contingent cash payment of up to £2.75 million) relating to the Acquisition. The Company plans to acquire Blueburra Holdings to expedite its marketing strategy in the UK. The Board believes the Acquisition would achieve this by adding further reach and capability to its current affiliate marketing subsidiary, Quickthink Media and adding an enlarged database of players for cross promotion, as well as further DragonFish Bingo Skins, which will allow for greater group cross marketing and consequently, monetisation.

 

Additionally, the Acquisition will add approximately £1.1 million of EBIT to the Group per annum, as well as further solidifying Gaming Realms as a leader in online digital gambling marketing. The Target Group is expected to benefit from the Group's experienced management team, who will work to enhance customer service levels and improve operational efficiency. The Acquisition is intended to provide the Group with a stronger position in the online gambling market.

 

The Board believes that the Acquisition is consistent with the Group's long term strategy to increase the combined databases of the Company's subsidiaries and enhance the Group's revenues by focusing on product and marketing initiatives which:

§ cover the substantial and overlapping fast growing audience;

§ converge 'paid participation' business models; and

§ include shared distribution on web, tablet and mobile platforms.

 

Additionally, it has been agreed that certain members of the existing management team of Blueburra Holdings will join the combined business, which the Directors believe will enhance the existing team and grow the enlarged business.

 

Finally, the Acquisition is expected to allow for a more rapid roll out of the Group's own gambling products which are planned to go live by the end of August 2014.

 

 

Key Terms of the Acquisition

 

Under the terms of the Agreement, the Company has conditionally agreed to acquire the entire issued share capital of the Target (the holding company of Digital Blue), for the following consideration:

§ payable on Completion:

§ £2.5 million in cash; and

§ £2.5 million to be satisfied by the issue of the Completion Consideration Shares, issued at a price of 33 pence per share, and

§ payable over the next three years, subject to the fulfilment of certain earn-out targets and adjustments:

§ up to an additional £2.75 million in cash; and

§ up to an additional £2.75 million to be satisfied by the issue of new Ordinary Shares, issued at a price per share equal to the average closing share price for the Ordinary Shares on the last trading day of each week for the three month period ending on the date immediately prior to the date of the notice convening the Company's AGM in each year following the relevant earn out period.

 

The Acquisition and the Placing are conditional upon (among other things) the passing of the Resolutions to authorise the Directors to issue the Completion Consideration Shares and the Placing Shares, which are set out in the Notice of General Meeting and Admission. 

 

Financial Information on the Target Group

 

Blueburra Holdings was incorporated in 2010 and consists of two main revenue lines. The historic revenue source is affiliate marketing via its website BingoPort.co.uk on a revenue share for gambling clients such as GalaBingo, Ladbrokes and Cashcade. This revenue has been augmented by a number of white label bingo skins launched since March 2010 such as Butterfly Bingo and Diva Bingo, which have been launched via the marketing company Digital Blue.

In addition, below is key financial information on the Target Group, based upon audited financial statements for the eleven months to 31 January 2014:

§ Total assets (as at 31 January 2014): £2.2 million;

§ Turnover: £3.8 million; and

§ Profit before tax: £1.9 million (which includes £0.75 million of extraordinary income related to the sale of Intellectual Property in the period).

 

 

The Placing

 

By the issue of the Placing Shares at the Placing Price, the Company proposes to raise approximately £5.8 million net of expenses. The Placing Shares will represent approximately 9.7 per cent. of the Enlarged Share Capital.

 

The Placing Shares will, when issued, rank in full for all dividends declared, made or paid after the date of their issue and otherwise pari passu with the Existing Ordinary Shares. The Placing Price represents a discount of approximately 14.8 per cent. to the price of 38.75 pence per Ordinary Share, being the Closing Price of the Company's Ordinary Shares on 18 August 2014.

 

Cenkos has entered into the Placing Agreement with the Company whereby it has agreed to use its reasonable endeavours, as agent for the Company, to procure placees for 18,148,487 Placing Shares.

 

The Placing is conditional on, inter alia, the passing of the Resolutions at the General Meeting and on the Placing Agreement becoming or being declared unconditional in all respects and not being terminated before Admission, on Completion of the Acquisition and on Admission.

 

Application will be made to the London Stock Exchange for the Completion Consideration Shares and the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Completion Consideration Shares and Placing Shares will commence on AIM on 5 September 2014. On Admission, the Enlarged Share Capital is expected to be 186,534,125 Ordinary Shares.

 

 

Use of Proceeds

 

The net proceeds of the Placing will be used as set out below:

§ approximately £2.5 million (and up to an additional £2.75 million) will be used to satisfy the Company's obligation to make cash payments to the shareholders of the Target Group following Completion of the Acquisition;

§ to enhance the Company's ability to develop and grow its products and to continue targeted marketing spend; and

§ otherwise for general working capital purposes and to strengthen the Company's balance sheet.

 

 

Current Trading and Prospects of Gaming Realms

 

In June, the Company released its unaudited half yearly report for the six months ended 31 March 2014. Operational highlights included revenue increasing 400 per cent. to £3.6 million, depositing players increasing 61 per cent. to 47,174 in the period and daily active players increasing 234 per cent. to 4,576.

 

Following the acquisition of Quickthink Media, in December 2013, for £2.3 million, the Board reported successful integration of this company, leading to a significant increase in player acquisitions and a reduction of 13 per cent. in average acquisition costs per new depositing player.

 

The Company continues to trade in-line with expectations.

 

Concert Party

As set out in the Company's Admission Document dated 15 July 2013, the existing Concert Party is interested in over 50 per cent. of the Existing Ordinary Shares. Upon completion of the Acquisition and the Placing, the Concert Party's aggregate interest in the Enlarged Share Capital will be 44.8 per cent. Under Rule 9 of the Code where any person, together with persons acting in concert with him (as defined in the Code) is interested in shares which, in aggregate, carry more than 30 per cent. of the voting rights of such company, but does not hold shares carrying 50 per cent. or more of such voting rights, a general offer will normally be required (in cash at the highest price paid in the last 12 months) if any further interest in shares is acquired by any such person. The members of the Concert Party will be informed that, save for pursuant to the exercise of certain options granted to them in connection with the readmission of the Company's shares to AIM in August 2013,  they should not purchase, subscribe for or seek to increase their interest in any shares in the Company until they receive either confirmation that the Takeover Panel has agreed to waive the obligation to make a general offer, or that the Concert Party's aggregate interest is below 30 per cent. of the issued share capital of the Company.

 

General Meeting

 

A circular ("the Circular") will today be posted to Shareholders containing a notice convening the General Meeting to be held at 44 Southampton Buildings, London WC2A 1AP at 10 a.m. on 4 September 2014 for the purposes of considering and, if thought fit, passing the Resolutions.

 

 

DEFINITIONS

 

The following definitions apply throughout the document, unless the context requires otherwise:

 

"Acquisition"	the conditional acquisition by the Company of the Target Shares pursuant to the terms of the Agreement;
"Admission"	admission of the Completion Consideration Shares and the Placing Shares to trading on AIM and such admission becoming effective in accordance with the AIM Rules;
"Agreement"	the conditional acquisition agreement dated 19 August 2014 between the Sellers and the Company pursuant to which the Company has agreed, conditional on, inter alia, the passing of the Resolutions, to acquire the Target Shares;
"AIM"	the AIM Market operated by the London Stock Exchange plc;
"AIM Rules"	the AIM Rules for Companies published by the London Stock Exchange plc from time to time;
"Cenkos"	Cenkos Securities plc, the nominated adviser and broker of the Company;
"Closing Price"	the closing middle market quotation of an Ordinary Share as at close of business on 18 August, which is the latest practical date before the publication of this document;
"Company" or "Gaming Realms"	Gaming Realms Plc, a company registered in England and Wales with company number 04175777 and registered office One Valentine Place, London, SE1 8QH;
"Completion"	completion of the Agreement in accordance with its terms;
"Completion Consideration Shares"	the 7,575,758 new Ordinary Shares to be issued and allotted to the Sellers on Completion;
"Digital Blue"	Digital Blue Ltd, a wholly owned subsidiary of the Target, registered in the Isle of Man with company number 006278V;
"Directors" or "Board"	the directors of the Company;
"Enlarged Share Capital"	the number of issued Ordinary Shares immediately following Admission and Completion;
"Existing Ordinary Shares"	the Ordinary Shares in issue immediately prior to Completion;
"General Meeting"	the general meeting of the Company to be held at 44 Southampton Buildings, London WC2A 1AP at 10 a.m. on 4 September 2014 and any adjournment of such meeting;
"Group"	the Company and its subsidiaries;
"Notice of General Meeting"	the notice convening the General Meeting, which is set out at the end of the Circular;
"Ordinary Shares"	ordinary shares of 10 pence each in the capital of the Company;
"Placing"	the proposed placing of the Placing Shares at the Placing Price pursuant to the Placing Agreement;
"Placing Agreement"	the conditional agreement dated 19 August 2014 between the Company and Cenkos;
"Placing Price"	33 pence per Placing Share;
"Placing Shares"	the 18,148,487 new Ordinary Shares which have been conditionally placed by Cenkos;
"Pre-Tax Profits"	profits before tax, as set out in the audited accounts of the Target Group for the relevant financial period;
"Quickthink Media"	Quickthink Media Limited, a company registered in England and Wales with company number 06703793;
"Resolutions"	the resolutions to be proposed at the General Meeting which are set out in the Notice of General Meeting;
"Sellers"	Scott Logan, Ruihi Wright and Christopher Phillips;
"Shareholders"	holders of the Existing Ordinary Shares;
"Target" or "Blueburra Holdings"	Blueburra Holdings Limited, a company registered in the Isle of Man with company number 004699V;
"Target Group"	Blueburra Holdings and Digital Blue; and
"Target Shares"	2,000 ordinary shares of £1 each of the Target, being all of the issued ordinary shares in the capital of the Target.

 

Notes to Editors:

 

About Gaming Realms

 

Gaming Realms is an online gaming business formed in 2012 to develop a new generation of social bingo and slot machine gaming concepts.

 

Gaming Realms was founded by the team behind Cashcade, which created the leading online bingo brand, Foxy Bingo, in addition to other online bingo and casino games. The success of Cashcade culminated in its sale to bwin.party digital entertainment plc for a total consideration of approximately £96 million in 2009.

 

 

About Blueburra Holdings

 

Blueburra Holdings was formed in 2010 and consists of two main revenue lines. The historic revenue is affiliate marketing via its website BingoPort.co.uk on a revenue share for gambling clients such as GalaBingo, Ladbrokes and Cashcade. This revenue has been augmented by a number of white label bingo skins launched since March 2010, such as Diva Bingo and Butterfly Bingo which have been launched via the marketing company, Digital Blue, which is currently operated from the Isle of Man.