Intertain Group Ltd, a Toronto-based online gaming holding company has formally signified its intent to acquire the entire assets and issued capital shares of Dumarca Holdings Ltd (DHL), parent company to Vera&John one of the newest and leading global online and mobile gaming company in today’s remote gambling industry. The Canadian company has executed a non-binding Letter of Intent (LOI) to buy the Malta-licensed DHL, in exchange for an initial cash payment of €44.5 million plus €36.5 million of Intertain’s common stocks valued at $10.29 per share, estimated as representing five million shares.
Inasmuch as the finalization of the acquisition agreement is still subject to regulatory approval, and that the expected date by which a definitive agreement would be reached and completed is on December 2014, the initial cash payment is subject to adjustments for net cash and working capital balances as of actual date of acquisition.
Moreover, DHL is asking “Earn Out” payments based on the excess of the 2015 and 2016 income generated by Vera&John before interest, taxes, depreciation and amortization or EBITDA. Based on a stipulated threshold of €10.1 million annually, Intertain will have to pay four times the amount in excess of each of the 2015 and 2016 EBITDA threshold; but subject to certain adjustments and to an overall Earn Out ceiling of €8.1 million.
The entire amount therefore, which Intertain has to pay in order to complete the acquisition of DHL is €89.1 million and without any credit arrangements involved. Intertain plans to settle the cash payment terms partly using cash-on-hand and through financing, or opt to exercise some outstanding warrant as additional source of funding for the cash requirement. Acting as exclusive financial advisor to Intertain in the DHL acquisition negotiation is Canaccord Genuity Corp.
Dan Anderson, Director at Dumarca Holdings, expressed excitement about the acquisition transaction being negotiated by Canada’s Intertain Group, commenting that both parties will bring excellent value if the deal pushes through. He added that DHL has reviewed alternatives to this deal before arriving at a conclusion that Intertain is the best partner, considering its aligned interest and stimulating growth prospects.
After all, Vera&John is an online casino operating globally and deriving as much as 75 percent of sales from the huge and growing market in the Nordic region. The online gambling site has around 490,000 registered members all actively using the site and making as many as 10,000 deposits daily. The site also has a mobile gambling platform that is expected to generate 35 percent of Vera&John’s turnover for this year.
In 2012, VJ realized net revenue of €11.60 million, which quickly rose to €25.9 million in 2013, indicating a growth rate of 124 percent. Of the €25.9 million net income in 2013, €4.6 million represented the EBITDA.
John Kennedy FitzGerald, the CEO of Intertain asserts that the Vera&John online casino has the ability to provide instant growth, as it runs without the need to maintain working capital, requires low capital expenditures (CAPEX), and most importantly, has a proven record of converting its operating cash flow into EBITDA. The acquisition agreement includes the retention of around 103 employees, including the VJ senior management team. All of which indicate that the Canadian company will not encounter any difficulty in fulfilling the Earn Out payment required by DHL.