LeoVegas acquires gaming operator Royal Panda

(PRESS RELEASE) -- LeoVegas AB has, through its wholly owned subsidiary LeoVegas International Ltd, entered into an agreement to acquire all of the shares in the Maltese company Web Investments Limited, whose group holds the Royal Panda trademark. The acquisition is being made for a purchase price of 60 million EUR with a possible earn-out payment of an additional 60 million EUR. Due to the acquisition and in order to act on future acquisition opportunities, the LeoVegas Group has obtained debt financing of 100 million EUR, of which 40 million EUR constitutes a revolving credit facility. Completion of the acquisition is expected to be transferred on 1 December 2017. Due to the acquisition, LeoVegas Board of Directors has adjusted the Company's financial targets.

The acquisition of Royal Panda strengthens LeoVegas' expansion in regulated gaming markets, especially in the U.K., and adds a strong and exciting brand to the LeoVegas Group. If certain financial milestones are met within 12 months after the date of completion, Royal Panda is entitled to a maximum earn-out payment of 60 million EUR. The total purchase consideration can thus amount to a maximum of 120 million EUR.

In order for Royal Panda to be entitled to the maximum earn-out, the company must achieve at least 50 million EUR in Net Gaming Revenue (NGR) and EBITDA of at least 15 million EUR, at least 34 million EUR of NGR must be derived from the U.K., and EBITDA from the U.K. must amount to at least 5 million EUR. The acquisition of Royal Panda is in line with LeoVegas strategy to continue growing on regulated markets.

LeoVegas has a strong cash position that has been used for the initial purchase price. In addition, LeoVegas has obtained a debt financing of 100 million EUR in order to act on future acquisition opportunities. Out of the 100 million EUR, 40 million EUR consists of a Revolving Credit Facility (RCF). The financing has a term of three years, and amortisation will commence in the second quarter of 2019 in the amount of 10 million EUR quarterly. The interest rate on financing is approximately 2%.

Royal Panda has a proprietary technical platform focused on online casino, and the company recently launched a sportsbook. The launch looks promising, and LeoVegas believes that the Royal Panda brand also works well with sport customers. The company today has approximately 60 employees, and its head office is located in Malta.

Royal Panda's main market is the U.K., which in the third quarter of 2017 accounted for 50% of revenue. During the same quarter, gaming on mobile devices accounted for 65% of revenue. During the third quarter of 2017 Royal Panda's total revenue grew 61% to 9.8 million EUR, with estimated EBITDA of 3.2 million EUR.

"Royal Panda has, in a short time, built up an efficient business with an exciting and strong brand. This is a major acquisition that we are carrying out following a carefully executed process. With the help of the strong symbolic value in the panda, the company has built a premium brand among gamers, and we will complement LeoVegas with Royal Panda. This gives us two great brands with global appeal, which makes the scalability in the continued growth strong while strengthening our position in the U.K.," comments Gustaf Hagman, Group CEO, LeoVegas.

With the acquisition of Royal Panda, LeoVegas can now leave the short-term financial targets for 2018 since the targets were set without taking any major acquisitions into account.

LeoVegas does not provide any future forecasts, but still has the following long-term targets:

• Long-term organic growth above online gaming market.
• Long-term at least 15% EBITDA margin assuming 100% regulated markets.
• LeoVegas dividend policy is to distribute a minimum of 50% of net profit over time.