LeoVegas agrees to acquire IPS

16 January 2018

(PRESS RELEASE) -- LeoVegas AB has entered into an agreement to acquire the assets of Intellectual Property & Software Limited and other related assets from two further companies, including top brands such as Casino, Slot Boss, Bet U.K. and UK Casino. During the fourth quarter of 2017, IPS generated revenues of 11.7 million GBP and, together with the companies whose assets are also being acquired as part of the transaction, have an adjusted EBITDA of 3.8 million GBP. The acquisition will be financed by cash and from existing debt facilities for a total consideration of 65.0 million GBP (73.5 million EUR). The acquisition will further strengthen LeoVegas' presence in the U.K. and its position as the leading mobile operator.

About the acquisition
LeoVegas has, through its wholly-owned subsidiary, LeoVegas Gaming Ltd, entered an agreement to acquire assets from the gaming operator IPS and related assets from European Domain Management Ltd, both of which are based in Alderney, Channel Islands. In addition, LeoVegas has agreed, through a wholly-owned U.K. subsidiary, to acquire the assets of Rocket 9 Ltd. Rocket 9 is a marketing services business based in Newcastle-upon-Tyne, U.K.

During the fourth quarter of 2017 IPS had revenues of 11.7 million GBP and, together with EDM and Rocket 9, adjusted EBITDA of 3.8 million GBP, representing an EBITDA margin of 32.6%. Revenue for the fourth quarter of 2017 grew by 49% compared with the fourth quarter of 2016. Of IPS' total revenue, 96% comes from the U.K. and 73% via mobile devices. The transaction is subject to certain closing conditions, and is scheduled to close late in the first quarter of 2018.

In connection with the 2017 acquisition of Royal Panda, LeoVegas secured debt financing of 100 million EUR. Of this amount, 40 million EUR consists of a Revolving Credit Facility. The facility has a term of three years, and amortisation will begin during the second quarter of 2019 at 10 million EUR per quarter. Interest on the facility is approximately 2%. This loan is now partly being used for this acquisition.

Gustaf Hagman, LeoVegas' Group CEO, comments, "To be able at our six-year anniversary of the launch of LeoVegas to conduct this remarkable acquisition feels just great! Since its start, LeoVegas has pursued a highly successful global brand strategy. Following the acquisition of Royal Panda, LeoVegas now works with two scalable brands. We believe that in larger markets our global brands, LeoVegas and Royal Panda, can be complemented with a local, multibrand strategy.

"The U.K. market is a very large and mature market and that is the reason to work with several brands that attract various types of customers. In IPS we see several attractive attributes, and they have tremendous momentum in their growth and profitability. Combined with one of the market's most effective customer acquisition models, we are now gaining a firm stronghold in the U.K. with the acquisition of 85 employees with local expertise. With this acquisition, we are adding a company culture with a strong technology and product focus which is a perfect fit with LeoVegas' to further strengthen the Group's position as the leading GameTech company."

IPS' strategy focusses on digital and data-driven customer acquisition that incorporates keyword optimization with multiple brands and customer acquisition sites. As a result, IPS operates one of the market's most effective customer acquisition models. This strategy, which is based on demographic segmentation and targeting, state-of-the-art technology and multiple customer acquisition sites, is optimized so that it can efficiently and effectively reach all potential customers from the online gaming category.

IPS currently uses a technical platform from Bede Gaming, and in connection with the acquisition LeoVegas has entered into a services agreement with Bede Gaming. During the due diligence process LeoVegas has determined that Bede's platform is very advanced from both a technical and product standpoint, thus a very good technology solution for the U.K. gaming market.

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