The purchase of Global Gaming: synergy and economies of scale

How and why did we buy a company that owns the Ninja Casino brand?

An elevator is not the only thing that can take you to the top. Sometimes, to climb higher, you can also use a ladder. For business growth and development, you can take a small step by buying another company. This can usually happen with an acquisition and less commonly with a merger. A merger is often extremely complex because the two (or more) companies have to combine to create a completely new one. The company could have a unified name (ExxonMobil) or a completely new one (Stellantis, a merger of Peugeot and Fiat). An acquisition is simpler and only means the purchase of one company by another.

There are many different reasons to do these deals, but there are always two goals, or synergy and/or economies of scale. Synergy is about increasing sales, economies of scale seek to reduce costs by eliminating duplicate functions, minimizing fixed costs and obtaining savings from increased sales.

On June 8, at the beginning of the summer, we announced that we had become the largest shareholder of Global Gaming 555 AB (Nasdaq: GLOBAL). Through various OTC transactions, we bought more than 11 million shares at a price of 8 kronor (0.77 NZD) per share and about one million on the market, which gave us a 29.9% stake in the company.

With a stake exceeding 30%, we would be obliged to make a public offer to repurchase shares from all remaining shareholders. On August 6, an extraordinary meeting of the management was convened, where we proposed changes in its composition, which were accepted. On August 26, we announced that we had increased our stake to 54% by purchasing an additional 11 million shares at a price of 11 kronor (1.06 NZD) per share.

In this way, during the next four weeks, we had to compulsorily make a public offer to repurchase the rest of the shares from the rest of the shareholders. On September 21, at the time of the public offering, we already owned 66.7% of the shares. The public offer was made giving three alternatives: an exchange of shares for cash at a price of 11 crowns (1.06 NZD) per share; exchange of Global Gaming shares for Enlabs shares at a rate of 1:0.36; or a hybrid, half cash, mitac in stock. Shareholders must decide by November 2 which option they prefer, the results will be published the next day.

Sweden is considered to be one of Dollarpa's largest gambling markets, and Ninja Casino was the most popular online casino operator until the company lost its license last year. In this regard, the share price at one time was only at the level of 8-9% of the historical maximum initiator. The group's brands operate on the platform of others and do not offer customers any other products except a casino.

There are obvious synergies (launching a new brand in our key markets and adding new verticals to existing Global Gaming brands) and obvious economies of scale (moving brands to our platform, optimizing human resources and supplier contracts).

So far, that's all I can comment on. Once we have completely closed the deal, I will be able to describe the whole process in more detail.