The information contained
within this announcement is deemed by the Company to constitute
inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU
Exit) Regulations 2019. Upon the publication of this announcement
via the Regulatory Information Service, this inside information is
now considered to be in the public domain.
21 March 2024
XLMedia plc
("XLMedia" or the "Group" or
the "Company")
Divestment of Europe and
Canada assets
Binding agreement to sell
Europe and Canada assets for a total consideration up to
$42.5 million
XLMedia (AIM: XLM), a leading global
digital media company that manages a portfolio of premium brands
with an emphasis on Sports and Gaming in regulated markets,
announces that it has entered into a binding agreement for the sale
of its Europe and Canada sports betting and gaming assets (the
"Assets") to Gambling.com Group Limited ("GAMB",
the "Purchaser") for a total
consideration of up to $42.5 million including a fixed sum of $37.5
million plus a potential earnout of up to $5.0 million
(the "Transaction").
Key
Highlights
Following the announcement on 15
December 2023 that the Company had been exploring the opportunity
to create shareholder value through further asset sales, the
Company has now agreed a sale of its Europe and Canada assets with
GAMB.
Total consideration for the
Transaction is up to $42.5 million, with fixed consideration of
$37.5 million ("Fixed Consideration"). In addition, the Transaction
provides earnout consideration of up to a further $5.0 million
based on revenue performance ("Earnout Consideration").
The Revenue and Adjusted
EBITDA1 attributable to the Assets for the year ended 31
December 2023 is estimated to be $21.4 million and $6.6 million
respectively.
Based on the expected Adjusted
EBITDA and Revenue for the year ended 31 December 2023 ("FY23"), as
announced on 8 February 2024, the total consideration of $42.5
million represents approximately:
·
3.5 times total expected Adjusted EBITDA of
c$12.0 million for the Group; and
·
A multiple of 6.4 times estimated Adjusted
EBITDA of $6.6 million for the Assets.
In addition, the total consideration
represents approximately 200% of the Group's market capitalisation
as at 20 March 2024.
Following the completion of the
Transaction, the Group will incur transition costs principally for
the migration of technology, for a period of six months. The
Group will retain cash, debtors and liabilities at the point of
completion.
The Group intends to use the
proceeds of the Transaction to cover asset transition costs, pay
the final deferred US acquisition payment and settle outstanding
tax provisions and provide working capital to support the North
America business while returning cash to shareholders.
The Transaction will allow the Group
to focus on delivering value for shareholders from its North
America business which remains well positioned to drive revenues
across its North America Owned and Operated ("O&O") and Media
Partnership Business ("MPB") businesses in existing US regulated
states and new states when they legalise online sports
betting.
1
Adjusted EBITDA is defined as the operating profit
after adding back depreciation, amortization, impairment, share
based payments, exceptional minimum guarantee cost, restructuring
costs and aborted deal related costs.
Commenting on the Transaction, Marcus Rich, Chair of XLMedia,
said:
"The Board believes the sale of
these assets, which is approximately two times the current market
capitalisation of the whole company, is an excellent outcome for
XLMedia and its shareholders.
Importantly, this transaction will allow the Company to clear
legacy liabilities, provide working capital and return cash to
shareholders."
1. INTRODUCTION
The Assets that are the subject of
the Transaction include the following: Freebets.com,
WhichBingo.co.uk, Nettikasinot.com and
Vedonlyonti.com, together with smaller Europe and
Canada sites. The Assets do not include XLMedia's North
America Owned and Operated and Media Partnership Business, which
represented approximately 55% of the expected Group revenues in
FY23.
The Fixed Consideration of $37.5
million is payable in cash in three installments as
follows:
·
the first installment of $20.0 million being
payable on the completion anticipated to be on 1 April
2024;
·
the second installment of $10.0 million on the
six-month anniversary of closing; and
·
the final installment of $7.5 million together
with any Earnout Consideration (up to a maximum of $5.0 million) on
the one-year anniversary of completion.
The Transaction is completed on a
cash-free, debt-free basis and implies a multiple of 6.4 times
estimated FY23 proforma Adjusted EBITDA attributable to the
Assets.
2.
BACKGROUND TO AND RATIONALE FOR THE DIVESTMENT
Since implementing its revised
strategic direction in recent years, XLMedia has focused the Group
on Sports and Gaming in regulated markets, continuing to pursue a
strategy of building a North America business while rebuilding the
Europe Sports and Gaming businesses and disposing of non-core
assets.
·
XLMedia launched its North America Sports market
presence with its first US acquisition in 2020 followed by two
further acquisitions in 2021.
·
2022 saw the Group continue its journey to evolve
from a Europe Gaming-led business to a North American Sports-led
business. North America Sports represented 65% of revenue in
2022.
·
2023 saw the premium Europe Sports and Gaming
assets return to growth while the North America business continued
to add new media partners which expanded its portfolio.
The Board confirms it had been in
discussions with potential acquirors regarding the possibility of a
sale of the whole Company, but it was clear while there was demand
for the assets, given the prevailing share price, a sale of the
whole Company was unlikely to create the most value for
shareholders.
In December 2023, the Board stated
it was exploring the opportunity to create shareholder value
through possible asset sales and had some early discussions with
potential purchasers, albeit no sale was completed at the
time.
3.
USES OF PROCEEDS AND FINANCIAL BENEFITS TO THE GROUP OF THE
DIVESTMENT
In FY23, the Assets are expected to
have contributed unaudited Revenue of $21.4 million and Adjusted
EBITDA of $6.6 million respectively. As of 31 December 2023, the
Assets had an unaudited balance sheet valuation of approximately
$15.4 million.
In FY22, the Assets are estimated to
have contributed Revenue of $22.1 million and Adjusted EBITDA of
$7.0 million respectively. As of 31 December 2022, the Assets had
an audited balance sheet valuation of approximately $25.9 million.
This valuation included three of the Group's Europe Gaming domains
and associated websites, Casino.se, Casino.gr,
and Casino.pt which were sold in July 2023 for approximately
$4.0 million.
The net proceeds from the Fixed
Consideration are expected to be approximately $35.0 million at
completion after relevant adjustments including estimated
transaction costs, settlement of transition costs and
reorganisation costs ("Net Cash Proceeds").
The Board intends to use the Net
Cash Proceeds to pay the final deferred acquisition payment of $4.0
million due in 2024, provide working capital for the North America
business and settle outstanding tax provisions while returning
significant cash to shareholders.
4.
UPDATE ON RETAINED GROUP AND FUTURE STRATEGY
Following completion, the Group will
be reorganised to support the North America business (the
"Business").
The Group's strategy for North
America remains to expand the Sports footprint, deepening audience
relationships and diversifying revenue streams with the goal of
more predictable, stable income. Additionally, the Business will
seek to drive Gaming in select markets through quality content and
engaging consumer features to capitalise on the high-margin
vertical.
The near-term focus will be to
continue to drive organic revenue growth while improving margins
and generating revenues. The Group does not have any current plans
for acquisition in North America.
XLMedia's Board will continue to
execute the delivery of this strategy whilst continually evaluating
ways to maximise shareholder value.
5.
DETAILS OF THE TRANSACTION AND PURCHASE AGREEMENT
The Company and XLMedia Publishing
Limited (together the "Sellers"), have entered into a binding Asset
Purchase Agreement (the "APA") with the Purchaser in relation to
the Assets.
Pursuant to the terms of the APA,
the Sellers are to sell the Assets, which comprise of a portfolio
of domains and certain contracts, intellectual property rights and
operator accounts required for the use and operation of those
domains.
Completion of the APA is in all
respects conditional upon both (1) no material adverse change
occurring in the operation of the Assets during the period between
signing and completion of the APA and (2) other usual completion
conditions.
The Fixed Consideration of $37.5
million is payable in cash in three installments as
follows:
·
the first installment of $20.0 million being
payable on the completion anticipated to be on 1 April
2024;
·
the second installment of $10.0 million on the
six-month anniversary of closing; and
·
the final installment of $7.5 million together
with any Earnout Consideration (up to a maximum of $5.0 million) on
the one-year anniversary of completion.
The Company will give customary
seller fundamental and business warranties and provide certain
indemnity protection to the Purchaser which are all subject to
financial caps.
For
further information, please contact:
XLMedia plc
David King, Chief Executive
Officer
www.xlmedia.com
|
ir@xlmedia.com
via Vigo Consulting
|
Vigo Consulting
Jeremy Garcia / Fiona Hetherington /
Kendall Hill
www.vigoconsulting.com
|
Tel: 020 7390 0233
|
Cavendish Capital Markets Limited (Nomad and
Broker)
Giles Balleny / Callum
Davidson
www.cavendish.com
|
Tel: 020 7220 0500
|
About XLMedia
XLMedia (AIM: XLM) is a leading
global digital media company that creates compelling content for
highly engaged audiences and connects them to relevant
advertisers.
The Group manages a portfolio of
premium brands with a primary emphasis on Sports and Gaming in
regulated markets. XLMedia brands are designed to reach passionate
people with the right content at the right time.