Partnerships between gaming development companies and casino operators are common in this industry. The game developers are always looking for ways to expand their presence in regulated markets. Casino operators are always looking for ways to expand their game portfolios. In a blockbuster deal late last week, NetEnt decided to take things to the next level by purchasing Red Tiger Gaming.
Red Tiger Gaming Acquired By Net Entertainment?
NetEnt has agreed to purchase Red Tiger Gaming for 220 million pounds. This equates to $241 million in US dollars and 220 million in euros. As a top gaming software development company, this will be its first major acquisition. Red Tiger has earned the reputation as a “slots specialist” in the iGaming industry.
Listed on the Stockholm Index, NetEnt will acquire Red Tiger in an all-cash deal. The initial enterprise value is 197 million pounds. There is an earn-out of up to 23 million pounds to be paid by 2022.
NetEnt chief executive Tehrese Hillman was quoted as follows:
“I am very pleased to welcome Red Tiger into the NetEnt Group. The acquisition combines two of the leading and most innovative companies in the online gaming industry. We look forward to working with Red Tiger’s fantastic team to enhance our combined global reach. And to offer further value to operators and players. The transaction will provide significant revenue synergies across our markets worldwide.”
An Offshoot Of Cayetano Gaming?
Red Tiger was founded in 2014 as an offshoot of Cayetano Gaming. It quickly emerged as an industry leader in supplying online slots and other real money online games. The company’s Daily Jackpot offering become a huge hit with operators and players. With operations in Malta, the Isle of Man and Bulgaria, Red Tiger employed roughly 170 people.
Gavin Hamilton is the chief executive for Red Tiger. He added his thoughts on the deal in the following statement:
“This is an exciting new stage of the Red Tiger story and we are delighted to become part of the NetEnt Group. Accessing NetEnt’s unparalleled distribution network and geographic footprint will unlock new opportunities for Red Tiger and will accelerate our growth. At Red Tiger we’ll remain focused as always on driving further innovation. And we are looking forward to working with NetEnt on how to leverage our combined capabilities to create new products that wow our customers.”
The initial 197 million in cash will purchase 100% of Red Tiger’s shares. The additional 23 million would be payable in 2022. This sum will be based on Red Tiger’s financial performance over the next two years. The maximum enterprise value of the deal is 223 million pounds. This calculates to 12x earnings before interest, taxes, depreciation and amortization (EBITDA) for 2019. The estimated earnings for this year are 18 million pounds.
NetEnt will also incur another SEK55 million in transaction and finance costs related to the deal. The deal is being financed primarily by Danske Bank and Nordea with new debt facilities. It was also reported that Lazard acted as a financial advisor to NetEnt to facilitate the purchase of Red Tiger. Cirio Advokatbyra acted as legal advisors.