In a significant move that could reshape the gaming industry landscape, Aristocrat Leisure has come close to finalizing its much-anticipated acquisition of online gaming company NeoGames. The deal, which carries a hefty price tag of $1.20 billion, was agreed upon last May, with Aristocrat expressing hopes to close the transaction within a 12-month timeframe.
Meeting key milestones, Aristocrat has now reported receiving or having waived all necessary pre-approvals. The company has diligently secured all antitrust and foreign investment regulatory clearances required for the purchase. With these regulatory hurdles cleared, only a handful of steps remain before the acquisition can be set in stone.
Among these steps is garnering approval from NeoGames’ shareholders, with a decisive vote scheduled on or around April 26. Should the shareholders echo the optimistic disposition suggested by the companies and vote in favor of the deal, Aristocrat plans to finalize the transaction on that very date. This progression suggests that by next week, the acquisition is likely to cement its place in corporate history.
If the deal is executed as planned, the transaction will lead to an organizational reshuffling for NeoGames. The company will move its statutory seat, registered office, and seat of central administration from Luxembourg to the Cayman Islands. In this restructuring, NeoGames will merge with an Aristocrat subsidiary, with NeoGames emerging as the surviving entity and thereby becoming an Aristocrat subsidiary.
Trevor Croker, the CEO and managing director of Aristocrat, acknowledged the venture’s “great opportunities” last year, citing clear potential in revenue and growth following the acquisition. Croker’s vision emphasizes leveraging the strengths of both entities to expand market opportunities and increase capabilities to realize their full potential. “This proposed acquisition builds on the strength and resilience of our business, expands market opportunities and adds capabilities to unlock our full potential,” Croker remarked in May 2023. “We remain focused on executing our proven growth strategy and creating long-term value for Aristocrat shareholders.”
The Chairman of NeoGames, John E. Taylor Jr., has also been a staunch advocate of the deal. He believes it presents “compelling” value for NeoGames shareholders, urging them to support the motion.
In the lead-up to the anticipated acquisition, NeoGames has reported a robust financial performance. The company saw a 21.1% increase in revenue to $254.4m in its last full preceding fiscal year. The earnings report, released in March, did not accompany an earnings call due to the impending transaction. The ilottery segment of NeoGames notably earned $57.0m, up by 1.2%, while their igaming revenue climbed to $134.6m, a 10.2% increase.
Despite this revenue upswing, the company’s expenses summed up to $218.2m, overshadowing the earnings and culminating in an $18.2m net loss for 2023. This figure was marginally better than the previous year’s $18.9m. However, a silver lining shone through their adjusted EBITDA, which doubled to an impressive $66.5m.
Aristocrat, which adheres to a different financial year than NeoGames, revealed its FY23 results in November, displaying a strategic focus that drove the revenue up by 13.0% to AU$6.30 billion. The growth was pinned on strategic investments and diversification initiatives, like the acquisition of Roxor Gaming earlier in January 2023, thus fostering the expansion of the Anaxi online arm.
The Pixel United social games business was a significant source of income, accounting for $2.65 billion or 42.1% of total revenue. Gaming revenue from the Americas increased by 14.0%, tallying at $1.85 billion. Meanwhile, Class III outright sales and other gaming revenue from the Americas, Australia and New Zealand, and other international segments surged by 32.0% to $1.80 billion.
Net profit for the year reached $1.48 billion, signaling a 4.8% decrease from the prior year, with the previous year’s number being buoyed by a $592.2 million gain from foreign exchange, affecting year-on-year comparisons.
However, the net profit after tax, excluding amortisation of acquired intangibles, showed substantial growth, marking a 46.7% increase at $1.54 billion. Furthermore, normalized EBITDA ascended to $2.11 billion, signifying a 33.2% rise.
This impending acquisition reflects a strategic move by Aristocrat to diversify its portfolio and strengthen its position in the online gaming sector. With both companies projecting confidence and growth, the gaming industry is poised to witness the emergence of a significantly fortified player in the market.
