NetEnt continues to increase its productivity and strengthen its competitiveness, and the integration of Red Tiger is an important part of this process. To support and accelerate the integration, NetEnt intends to accelerate the payment of the Red Tiger consideration through a directed issue of B shares to Red Tiger partners.
NetEnt acquired Red Tiger in September 2019. In conjunction with the acquisition, it was announced that additional consideration of up to £23 million could become payable in 2022 on an earn-out basis, subject to Red Tiger's financial performance over the next two years. Since the acquisition, Red Tiger's financial performance has significantly exceeded the company's expectations. By facilitating a full integration, the potential for extracting synergies increases for NetEnt, both in terms of revenue and costs. An example of revenue synergies already having a positive effect is the first jointly developed game, Piggy Riches™, which was released in January 2020 and has so far been the best game release ever for Red Tiger.
In order to support the integration of the companies, NetEnt has today entered into an amendment to the "SPA" share purchase agreement with the shareholders of Red Tiger. This means that the conditions for the payment of the earn-out are deemed to be fulfilled. Half of the earn-out consideration is to be paid by way of a directed issue of new B shares in the second quarter of 2020, and the remainder in cash in the second quarter of 2021.
The SPA Addendum is subject to the approval of a directed issue of 6,327,175 B Shares to Red Tiger shareholders by the annual general meeting "AGM" of NetEnt shareholders, scheduled for 29 April 2020. The new shares will be issued at a price of SEK 21.34 per share, which corresponds to the volume-weighted average price of NetEnt's B-shares on Nasdaq Stockholm during the period from 24 February to 20 March 2020.
Based on the addendum, NetEnt's board of directors proposes to the ordinary general meeting on 29 April 2020 to resolve a directed share issue in accordance with the conditions set out above. The notice of the annual general meeting will be sent separately today, including the detailed decision on the new share issue directed by the board of directors.
As a result of the proposed new share issue, NetEnt's share capital will increase by approximately SEK 31,762 to SEK 1,237,219. The total number of outstanding shares after the issue will be 245,458,035, divided into 33,660,000 A shares and 211,798,035 B shares. These figures are adjusted for the shares previously bought back for one million B shares. Therefore, the share issue results in a dilution of 2.6% of the total shares and 1.2% of the total votes of the company on a fully diluted basis "i.e. based on the total number of shares and votes outstanding after the issue".
Red Tiger's shareholders agree not to sell the newly issued shares during a lock-up period until March 2022. One of the shareholders is Gavin Hamilton, CEO of Red Tiger and newly appointed COO of NetEnt.
