NetEnt has struck an agreement to acquire Red Tiger Gaming Limited.
Since its establishment five years ago, Red Tiger has managed to maintain consistent improvement, receiving the best reviews and ratings from the recognized online casino gaming sites. With only 170 employees, Red Tiger boasts of high levels of innovation and profitability. The software provider has licenses in the UK, Malta, Gibraltar, and Alderney. They have also won numerous iGaming awards. The numbers speak the volume! The expected EBITDA in 2019 is around £18 million. The combination of profitability and innovation are Red Tiger’s traits that will improve the market presence of NetEnt.
Why Would NetEnt Consider the Deal?
The agreement complements NetEnt’s ambition to come up with the future of gaming. In the recent past, the organization has put in a lot of investment into worldwide infrastructure that aims to increase consumer outreach and a controlled market that complements a venue for scale.
Bringing Red Tiger onboard will provide NetEnt with a great opportunity to apply its scalable infrastructure optimally to support tomorrow’s growth. The combination of the two forces from two different market niches will help enhance a synergized global reach and thus, improve the quality of service to players around the world. Also, the performance of NetEnt, in terms of revenue collection, is expected to grow even further.
Currently, Red Tiger provides games for numerous casinos worldly, ranging from the biggest and most established to start-up ventures. NetEnt, on the other hand, has one of the best distribution networks and geographic footprint in the market. The combination of high-quality games and the current clientele, together with NetEnt global infrastructure, will improve the performance of NetEnt in many aspects.
First, the number of games on offer will increase due to the acquisition of Red Tiger’s games. Also, the inheritance of Red Tiger’s creative workforce will improve the quality of service offered by the company. Ideally, NetEnt is expected to reach out to clients, including casinos that are approved by the Swedish Gaming Authority Gaming Inspection (spelinspektionen). Thus, the overall performance of the two companies, when they combine their strengths and shield each other from their respective weaknesses, will eventually improve.
Financial Valuation of Red Tiger
The agreement quotes the enterprise value of Red Tiger at £223 million. However, the money deal will be settled in two phases. The first payment of £197 million paid by NetEnt will claim 100% of Red Tiger’s shares. Additional payment will be made later as well as the original purchase consideration.
On the other end, the second payment will depend on the performance of the Red Tiger upon the takeover. Further payment up to a maximum of £23 million will be cleared in 2022, depending on the financial performance of Red Tiger between now and 2022. The payment will be a percentage of the gross sales as agreed upon by the two parties. As mentioned earlier, the total payment implies that the valuation of the enterprise is £223. The enterprise value was arrived at through the EBITDA multiple of 12 times the current year EBITDA.
Acquisition Funding
NetEnt managed to acquire Red Tiger through new debts facilitated by Danske Bank and Nordea. Although Red Tiger has been obtained through debt, the deal is set to service the debt based on the anticipated improved performance as a result of the acquisition. Lazard was the
The acquisition of Red Tiger by NetEnt is a big step towards NetEnt’s ambition for creating the future of gaming. The combined talent and infrastructure from the two organizations complement each other effectively to drive product improvement as well as market performance. This move by NetENt is an exciting one and we can expect a global impact in terms of increased value to operators and significant revenue synergies across their global markets.
