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Announces $15
Million Bought Deal Financing
- Combined Platform to reach 300 million gamers monthly
generating more than 4.2 billion monthly views
- Includes 70 million Esports fans across world class
organization, Luminosity Gaming and Call of Duty and Overwatch
League franchises, Seattle Surge and Vancouver Titans
- Over 500 gaming influencers with combined subscriber base of
over 500 million on YouTube and Twitch
- Pro forma 2019 revenue of ~$110
million
- Combined company expected to immediately generate positive
EBITDA
- Acquisition delivers on core strategic priorities of (1)
owning more viewers, (2) creating more content, (3) driving
subscriptions, (4) new revenue streams, and (5) improved analytics
for targeted advertising
TORONTO, Aug. 6, 2020 /CNW/ - Enthusiast Gaming Holdings
Inc. ("Enthusiast Gaming" or the "Company") (TSX:
EGLX) (OTCQB: ENGMF) (FSE: 2AV) is excited to announce that it has
entered into a binding share purchase agreement (the
"Agreement"), to acquire 100% of the issued and outstanding
shares of Omnia Media Inc. ("Omnia") from Blue Ant Media
Solutions Inc. ("Blue Ant"), to create the largest gaming
media, esports and entertainment platform in North America by users, with 300 million video
game and esports fans monthly.
Upon completion of the Agreement, Enthusiast Gaming will acquire
100% of the issued and outstanding shares of Omnia from Blue Ant
(the "Transaction"). The purchase price will consist of
18.25 million common shares of Enthusiast Gaming (each a "Common
Share" and together, the "Share Consideration"),
$11.0 million in cash (the "Cash
Consideration"), subject to adjustments, and a vendor-take-back
note ("VTB") with a face value of $5.75 million. All $ figures are in
Canadian dollars unless noted otherwise. The Transaction is
expected to close during the third quarter of 2020, subject to
customary closing conditions.
Based in Los Angeles,
California, Omnia is a leading global gaming YouTube
platform which creates, manages and operates a multi-channel
YouTube network that distributes premium, original content. Its
platform is one of the most highly visited on YouTube for video
game related content. Omnia produces and programs
over 30 weekly shows across AVOD (advertising-based video on
demand) and OTT (over-the-top) channels and represents over 500
gaming influencers across YouTube and Twitch. Its distribution
network reaches over 90 million unique viewers and boasts a
significant U.S. market inventory of over 1,000 channels, over 500
million subscribers and over 3.2 billion monthly total video
views.
The "Gen Z" and Millennial generations consume content much
differently than ever before. Video game related content is the
leading form of content consumed and YouTube is the leading
platform. As a result, the fastest growing marketing channel
targeting the 3 billion Gen Zs and Millennials around the world is
influencer marketing, with YouTube being the dominant platform to
reach consumers. Influencer marketing has grown over 300% in the
past three years and is expected to reach nearly US$10 billion in 2020 (Source: Influencer
Marketing Hub). Gaming is the new social network for people to
connect and engage, and the combined Enthusiast Gaming & Omnia
platform has more touch points than any other gaming company in
North America. The combination
positions Enthusiast Gaming as an industry leader for brands and
advertisers targeting the "Gen Z" and Millennial
generations.
Key Transaction Highlights
The transaction will make Enthusiast Gaming the largest gaming
media, esports and entertainment platform in North America by users and visitors, according
to ComScore, with over 100 affiliated web properties, over 1,000
YouTube channels, more than 26 million YouTube subscribers on owned
and operated channels and over 500 gaming influencers. Combined,
the portfolio will reach over one billion views on website
properties and over 4.2 billion views across all channels monthly,
with over 75% of views being premium video. The combination also
provides expansion opportunities into new distribution channels via
Omnia's established presence including Snapchat, Twitch, Amazon,
Roku, Samsung and Twitter. The Transaction is expected to be
immediately accretive to Enthusiast Gaming.
- Omnia generated revenue of USD$46.5
million and USD$59.9 million
for the fiscal 12-month period ending August
31, 2018 and August 31, 2019,
respectively
- Blue Ant is expected to own approximately 18% of Enthusiast
Gaming upon completion of the Transaction and Offering
- Material revenue synergies going forward via cross-selling
talent and content
- Expected cost savings and synergies of $500,000 to $1,000,000 per year
Synergies to Enthusiast Gaming's Core Growth Drivers
- Own More Viewers - adds 3.2 billion monthly views,
90 million unique monthly visitors and 1,000 YouTube channels
- Create More Content - produces ~ 30 gaming shows per
week and is a content engine to fuel increased engagement of gaming
communities via a fully built out production team in Los Angeles
- Sell More Ads and Subscriptions - premium inventory
increases direct sales and margin accretion. This in turn drives
influencers and blue-chip sponsors with increase in subscription
formats and concepts
- Develop New Revenue Streams - increases owned and
operated content, network of over 500 gaming influencers and talent
management services, and e-commerce and content licensing
- Improved Analytics for Advertising - extensive data set
for mining, and improved analytics for targeted advertising. Value
is increasing for first party data and knowledge due to privacy
issues
Adrian Montgomery, CEO of
Enthusiast Gaming commented, "Omnia is a
transformational acquisition for Enthusiast Gaming and adds
immediate strategic and financial value to our platform. The
addition of Omnia Media positions Enthusiast Gaming as the largest
gaming media platform in North
America, with more touchpoints to connect gamers to unique
content experiences than any other gaming company. The combination
is on strategy and has many expected synergies with our existing
audience and advertising and distribution partners. We look forward
to welcoming and working much closer with the Omnia team in LA to
continue delivering on our strategic growth drivers."
Michael MacMillan, CEO and
co-founder of Blue Ant, commented, "We are delighted to
share that Omnia Media will be joining Enthusiast Gaming, a move
that will solidify Omnia's bright future with the scale and access
Enthusiast provides as a publicly traded company. This transaction
is an exciting, new way for Blue Ant to continue its investment in
the esports market."
Initial Purchase Price Financing Details
In consideration for the sale of Omnia, Blue Ant will receive
(i) the Cash Consideration, subject to a customary working capital
adjustment and holdbacks which will be funded through a combination
of cash-on-hand and the Offering (as defined below), (ii) the Share
Consideration, which will be subject to resale restrictions of: 50%
after 180 days; 25% after 270 days; and 25% after 360 days, and
(iii) the VTB with a face value of $5.75
million, which will bear a 9.0% annual interest rate and
carry a maturity of 36 months. Prior to the completion of the
Transaction, Omnia will dispose of certain assets unrelated to its
core-gaming business.
Blue Ant will also be entitled to nominate a director to the
board of directors of Enthusiast Gaming until it ceases to hold
either (i) at least 75% of the Share Consideration or (ii) 10% of
the issued and outstanding Common Shares.
Bought Deal Offering
Enthusiast Gaming has entered into an agreement with Canaccord
Genuity Corp. ("Canaccord Genuity") as lead underwriter on
behalf of a syndicate of underwriters, including co-lead Paradigm
Capital Inc. (together with Canaccord Genuity, the
"Underwriters") to sell, on a bought deal basis, 10 million
Common Shares (the "Offered Shares") at a price of
$1.50 per Offered Share (the
"Offering Price") for gross proceeds of $15 million (the "Offering"). In addition,
Enthusiast Gaming has granted the Underwriters an option to
purchase up to an additional 1.5 million Offered Shares on the same
terms as the Offering (the "Over-Allotment Option"),
representing additional gross proceeds of $2.25 million if the Over-Allotment Option is
exercised in full. The Over-Allotment Option is exercisable at any
time until the date that is 30 days following the closing date of
the Offering. The net proceeds of the Offering will be used to fund
in part the Transaction, certain costs related to the Transaction
and for general corporate purposes.
The Offered Shares will be offered in Canada pursuant to a short form prospectus to
be filed in each of the provinces of Canada (other than Quebec) under National Instrument 44-101 –
Short Form Prospectus Distributions and may be offered
outside of Canada on a private
placement basis in sales exempt from applicable prospectus and/or
registration requirements. Additional details concerning the
Transaction and the Offering will be contained in the short form
prospectus.
The issuance of the Offered Shares pursuant to the Offering and
the Share Consideration pursuant to the Transaction are subject to
customary approval of the Toronto Stock Exchange. Closing of the
Offering is expected to occur on or about August 31, 2020.
The Common Shares have not been, and will not be, registered
under the U.S. Securities Act of 1933 (the "U.S. Securities
Act"), as amended, and the Offered Shares may not be offered or
sold in the United States, absent
registration or an applicable exemption from registration. This
press release shall not constitute an offer to sell or the
solicitation of an offer to buy the Offered Shares. The offering or
sale of the Offered Shares shall not be made in any jurisdiction in
which such offer, solicitation or sale would be unlawful.
Advisors
Canaccord Genuity acted as financial advisor to Enthusiast
Gaming in connection with the Transaction. B. Riley FBR, Inc. acted
as a corporate finance advisor to Enthusiast Gaming in the United States. Cormark Securities Inc.
acted as financial advisor to Blue Ant. Enthusiast Gaming was
represented by Norton Rose Fulbright Canada LLP and Blue Ant was
represented by Bennett Jones LLP. The Underwriters were represented
by Stikeman Elliott LLP.
The Company also announces that it has received confirmation of
a one-year extension (the "Extension") on the term of its
$20 million secured loan (the
"Facility"). The Facility, entered into on August 2, 2019, had an original maturity date of
August 2, 2021. Following the
Extension, the Facility will have a maturity date of September 6, 2022. The Extension is subject to
the satisfaction or waiver by the lender of certain conditions
precedent, including the completion of the Transaction and
Offering.
About Enthusiast Gaming
Enthusiast Gaming (TSX: EGLX)(OTCQB: ENGMF)(FSE: 2AV) is
building the world's largest platform of communities for gamers and
esports fans. Already the largest gaming platform in North America and the United Kingdom, the Company's business is
comprised of three main pillars: Media, Entertainment and Esports.
Enthusiast Gaming's digital media platform includes approximately
100 gaming related websites and 900 YouTube channels which
collectively reach 160 million visitors monthly. The Media platform
generates over 30 billion ad requests and approximately a billion
views per month. Enthusiast Gaming's esports division, Luminosity
Gaming, is a leading global esports franchise that consists of 7
professional esports teams under ownership and management,
including the Vancouver Titans Overwatch team and the Seattle Surge
Call of Duty team. Collectively, the integrated ecosystem reaches
over 200 million gaming enthusiasts on a monthly basis. Enthusiast
Gaming's entertainment division, EG Live, owns and operates
Canada's largest gaming expo,
Enthusiast Gaming Live Expo, EGLX (eglx.com), and the largest
mobile gaming event in Europe,
Pocket Gamer Connects (pgconnects.com). For more information on the
Company visit enthusiastgaming.com. For more information on
Luminosity Gaming visit luminosity.gg.
Certain information in this news release constitutes
forward-looking statements under applicable securities laws. Any
statements that are contained in this news release that are not
statements of historical fact are forward-looking statements.
Forward looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "potential", "believe",
"intend", "estimate" or the negative of these terms and similar
expressions.
Forward-looking statements in this news release include, but are
not limited to statements with respect to: (i) the Transaction and
the Offering and the timing for their completion; (ii) the
satisfaction of closing conditions which include, without
limitation, obtaining the necessary approvals from the Toronto
Stock Exchange, (iii) the effect of the Transaction and the
Offering on the parties, including the growth prospects of
Enthusiast Gaming following the Transaction; (iv) the anticipated
benefits associated with the Transaction; and (v) the intended use
of proceeds of the Offering in connection with the Transaction.
Forward-looking statements are based on certain assumptions
regarding Enthusiast Gaming and Omnia, including the completion of
the Transaction, anticipated benefits from the Transaction, and
expected growth, results of operations, performance, industry
trends and growth opportunities. While Enthusiast Gaming considers
these assumptions to be reasonable, based on information currently
available, they may prove to be incorrect. Readers are cautioned
not to place undue reliance on forward-looking statements. The
assumptions of Enthusiast Gaming, although considered reasonable by
them at the time of preparation, may prove to be incorrect.
In addition, forward-looking statements necessarily involve
known and unknown risks, including, without limitation, risks
associated with general economic conditions; adverse industry
events; future legislative, tax and regulatory developments;
inability to access sufficient capital from internal and external
sources, and/or inability to access sufficient capital on
favourable terms; the inability to implement business strategies;
competition; currency and interest rate fluctuations; a potential
increase in the severity of the COVID-19 pandemic and its potential
impacts on the Company's business and other risks. Among other
things, there can be no assurance that the Transaction will be
completed or that the anticipated benefits from the Transaction
will be achieved. Readers are cautioned that the foregoing list is
not exhaustive. Readers are further cautioned not to place undue
reliance on forward-looking statements as there can be no assurance
that the plans, intentions or expectations upon which they are
placed will occur. Such information, although considered reasonable
by management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those anticipated.
For more information on the risk, uncertainties and assumptions
that could cause anticipated opportunities and actual results to
differ materially, please refer to the public filings of Enthusiast
Gaming which are available on SEDAR at www.sedar.com.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement and reflect our
expectations as of the date hereof, and thus are subject to change
thereafter. Enthusiast Gaming disclaims any intention or obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by law.
There are measures included in this press release that do not
have a standardized meaning under generally accepted accounting
principles (GAAP) and therefore may not be comparable to
similarly-titled measures and metrics presented by other issuers
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP. In
particular, "pro forma revenue" and "EBITDA" are non-GAAP measures.
Enthusiast Gaming includes these measures because it believes
certain investors use these measures and metrics as a means of
assessing financial performance and that such measures highlight
trends in the Company's financial performance that may not
otherwise be apparent when one relies solely on GAAP measures.
"Pro Forma Revenue" is defined as the revenue that would have
been recognized on a consolidated basis over the indicated period
assuming Enthusiast Gaming had completed the acquisition of Omnia
prior to that period.
"EBITDA" represents net income before interest, income taxes,
depreciation and amortization, with potential adjustments for
certain non-core or non-operational items. EBITDA should not be
considered in isolation or as a substitute for net income or other
income statement information prepared in accordance with GAAP and
may not be comparable to similarly titled measures used by other
companies.
This news release contains future-oriented financial information
and financial outlook information (collectively, "FOFI") about
Enthusiast Gaming's pro forma results of operations, including
revenue growth, following completion of the Transaction, all of
which are subject to the same assumptions, risk factors,
limitations, and qualifications as set forth in the above
paragraphs. FOFI contained in this news release was made as of the
date of this news release and was provided for the purpose of
providing further information about the Company's future business
operations. Enthusiast Gaming disclaims any intention or obligation
to update or revise any FOFI contained in this news release,
whether as a result of new information, future events or otherwise,
except as required by law. Investors are cautioned that the FOFI
contained in this news release should not be used for purposes
other than for which it is disclosed herein.
Neither the TSX Exchange nor its Regulation Services Provider
(as that term is defined in the policies of the TSX Exchange)
accepts responsibility for the adequacy or accuracy of this
release.
SOURCE Enthusiast Gaming