Evolution AB to Acquire Galaxy Gaming

Evolution AB (publ), through its wholly-owned subsidiary @Evolution Malta Holding Limited, has made a significant strategic move by entering into an agreement to acquire @GalaxyGaming, Inc. This #transaction, valued at approximately $85 million and payable in #cash, represents a major milestone in Evolution’s journey to cement its position as a global leader in the #casino gaming industry.

Galaxy Gaming: Innovating the Casino Experience

Galaxy Gaming has long been recognized as a trailblazer in the casino industry. The company specializes in developing and distributing innovative casino table games and enhanced gaming technology solutions. Over the years, Galaxy Gaming has built a robust portfolio of cutting-edge products, including proprietary table games and side bets that have gained widespread popularity among casinos worldwide. Its offerings are renowned for their quality, engaging gameplay, and the ability to enhance the gaming experience for players. This reputation has established Galaxy Gaming as a trusted partner for casinos looking to differentiate themselves in a competitive market.

Strategic Rationale for the Acquisition

The acquisition of Galaxy Gaming aligns perfectly with Evolution’s strategic vision of becoming the premier provider of casino games. Evolution is known for its live casino solutions, and integrating Galaxy Gaming’s state-of-the-art products and technology will complement its existing portfolio, allowing Evolution to offer a broader range of gaming content. This move is also a strategic play to strengthen Evolution’s presence in the US market, a region with significant growth potential in the iGaming sector.

Martin Carlesund, CEO of Evolution AB, expressed his enthusiasm about the acquisition: “We are thrilled to announce the acquisition of Galaxy Gaming, which represents a significant milestone in our mission to provide unparalleled gaming experiences to our customers. Galaxy Gaming’s exceptional products and technology complement our existing portfolio and strengthen our strategic position.”

Maintaining Operational Independence

A key aspect of this acquisition is Evolution’s decision to retain Galaxy Gaming’s management and employees, allowing the company to operate as a separate and independent business unit. This approach is designed to preserve the unique culture and innovative spirit that has driven Galaxy Gaming’s success while leveraging Evolution’s operational and financial strength to support further growth and expansion.

Matt Reback, President and CEO of Galaxy Gaming, emphasized the strategic benefits of the acquisition: “We believe this transaction represents the opportunity to unite two world-class, customer-focused teams in a way that will benefit all stakeholders. It combines Galaxy Gaming’s thriving land-based business, driven by our industry-leading games and progressive technologies, with Evolution’s global reach and innovative online gaming leadership. For years, our collaboration has successfully delivered popular games like 21+3® and LuckyLadies® to millions of players in regulated iGaming markets globally. This acquisition by Evolution empowers Galaxy to sustain and maintain its independence while continuing to focus on growth and expanding its operations, leveraging Evolution’s operational and financial strength to facilitate product sharing and drive cutting-edge omni-channel innovation.”

Financial Overview and Transaction Details

Galaxy Gaming has provided financial guidance for fiscal year 2024, projecting net revenue of $29.0 – $30.0 million and adjusted EBITDA of $12.0 – $13.0 million. Under the terms of the Merger Agreement, Evolution will acquire all outstanding shares of Galaxy Gaming’s common stock at $3.20 per share in cash. This price represents a premium of 124% over Galaxy Gaming’s closing share price on July 17, 2024, the last trading day before the announcement of the transaction. The total equity value of the transaction is approximately $85 million, with the inclusion of net debt bringing the overall valuation to around $124 million.

The transaction has received approval from Galaxy Gaming’s board of directors. Additionally, board members holding approximately 14% of Galaxy Gaming’s common stock have entered into support agreements to vote their shares in favor of the deal. The completion of the transaction is subject to customary closing conditions, including approval from Galaxy Gaming’s stockholders and necessary gaming regulatory approvals. The parties anticipate closing the transaction in mid-2025, contingent upon the satisfaction of these conditions.

Advisors and Financial Arrangements

For this transaction, Evolution has engaged J.P. Morgan SE as its exclusive financial advisor and Kirkland & Ellis LLP as its legal advisor. Galaxy Gaming has retained Macquarie Capital as its exclusive financial advisor and Latham & Watkins LLP as its legal advisor.

Market Implications and Future Prospects

The acquisition of Galaxy Gaming by Evolution AB is poised to have significant implications for the casino and iGaming industries. This move not only enhances Evolution’s product portfolio but also strengthens its competitive position in the market. By combining Galaxy Gaming’s innovative table games with Evolution’s expertise in live casino solutions, the merged entity is well-positioned to offer a comprehensive suite of gaming products that cater to the evolving preferences of players and operators alike.

The transaction is also expected to drive synergies between the two companies, particularly in terms of product development and market expansion. Evolution’s global reach and established relationships with online gaming operators will provide Galaxy Gaming with new opportunities to expand its footprint in regulated iGaming markets worldwide. Conversely, Galaxy Gaming’s strong presence in the land-based casino segment will enable Evolution to diversify its revenue streams and tap into new growth areas.

Enhancing Customer Experience through Innovation

One of the key drivers behind this acquisition is the shared commitment of both companies to enhancing the customer experience through innovation. Galaxy Gaming has a proven track record of developing engaging and entertaining table games that resonate with players. By integrating these games into Evolution’s platform, the combined company will be able to offer a seamless and immersive gaming experience that appeals to a broad audience.

Furthermore, the acquisition opens up new possibilities for omni-channel innovation. With Evolution’s expertise in live casino solutions and Galaxy Gaming’s strength in table game development, the merged entity is well-positioned to create integrated gaming experiences that bridge the gap between online and land-based casinos. This approach not only enhances player engagement but also provides operators with new tools to attract and retain customers.

Industry Leadership and Competitive Advantage

The acquisition of Galaxy Gaming by Evolution AB underscores the company’s commitment to maintaining its leadership position in the casino gaming industry. By continually expanding its product portfolio and enhancing its capabilities, Evolution is able to stay ahead of the competition and meet the evolving needs of its customers. This strategic move also reinforces Evolution’s reputation as an industry innovator, capable of delivering high-quality gaming solutions that set new standards for the market.

The combined entity’s competitive advantage lies in its ability to offer a comprehensive suite of gaming products that cater to a wide range of preferences. From innovative table games and side bets to immersive live casino experiences, the merged company is well-equipped to provide operators with the tools they need to differentiate themselves in a crowded market. This diverse product offering not only enhances customer satisfaction but also drives revenue growth by attracting a larger and more engaged player base.

Regulatory Considerations and Compliance

The successful completion of the transaction is contingent upon obtaining the necessary regulatory approvals. Both Evolution and Galaxy Gaming have extensive experience navigating the complex regulatory landscape of the gaming industry, and their combined expertise will be instrumental in ensuring a smooth and compliant integration process.

In addition to regulatory compliance, the merged entity will continue to prioritize responsible gaming practices. Both companies are committed to promoting a safe and fair gaming environment for players, and this commitment will remain a core focus as they move forward together. By adhering to the highest standards of integrity and transparency, Evolution and Galaxy Gaming will be able to build trust with their customers and stakeholders, further solidifying their position as industry leaders.

Conclusion: A Transformative Acquisition

The acquisition of Galaxy Gaming by Evolution AB marks a transformative development in the casino and iGaming industries. This strategic move not only enhances Evolution’s product portfolio and market presence but also reinforces its strategic objectives. As both companies work towards the successful integration of their operations, the merger promises to bring about significant advancements in gaming technology and customer experience.

By leveraging their combined strengths, Evolution and Galaxy Gaming are well-positioned to drive innovation, expand their market reach, and deliver unparalleled gaming experiences to players around the world. As the industry continues to evolve, the merged entity’s commitment to excellence and innovation will ensure its continued success and leadership in the global gaming market.

FAQs

What is the total value of the acquisition of Galaxy Gaming by Evolution AB?
The total value of the acquisition is approximately $85 million, payable in cash.

What is the per-share purchase price for Galaxy Gaming's stock?
Evolution AB will acquire Galaxy Gaming's stock at $3.20 per share in cash.

How does the acquisition align with Evolution AB’s strategic goals?
The acquisition aligns with Evolution AB’s goal to become the world’s leading provider of casino games and enhances its position in the US market.

What are some of Galaxy Gaming's notable products?
Notable products from Galaxy Gaming include 21+3® and LuckyLadies®, which are popular in regulated iGaming markets.

When is the expected closing date for the transaction?
The transaction is expected to close in mid-2025, subject to customary closing conditions.

Who are the advisors for the transaction?
Evolution AB has engaged J.P. Morgan SE as its financial advisor and Kirkland & Ellis LLP as its legal advisor, while Galaxy Gaming has retained Macquarie Capital and Latham & Watkins LLP.

What will happen to Galaxy Gaming’s management and employees post-acquisition?
Evolution AB plans to retain Galaxy Gaming’s management and employees, operating the company as a separate and independent business unit.

What financial guidance has Galaxy Gaming provided for fiscal year 2024?
Galaxy Gaming has provided guidance of $29.0 – $30.0 million in net revenue and $12.0 – $13.0 million in adjusted EBITDA.

How does this acquisition benefit Galaxy Gaming's future operations?
The acquisition allows Galaxy Gaming to maintain its independence while leveraging Evolution’s operational and financial strength to drive growth and innovation.

What premium does the acquisition price represent over Galaxy Gaming’s share price?
The acquisition price represents a 124% premium over Galaxy Gaming’s closing share price on July 17, 2024.