Following the surprise news yesterday that NetEnt has agreed to purchase Red Tiger, CEO Therese Hillman said this morning that the deal would perfectly complement the gaming giant’s growth plans.
Through the new acquisition, which is expected to be close in time for Red Tiger’s performance to be consolidated in NetEnt’s Q3 results, NetEnt is striving to utilise the opportunity to capitalise on its scalable technology to support future growth.
Speaking on the conference call, Hillman explained: “Red Tiger has been very successful since it has started. It has quickly established itself as one of the top suppliers in the online gaming market. We have been very impressed by them over the years.
“What is appealing about Red Tiger is their very strong market presence in the UK, as well as in Northern Europe, and we think that they are a very good fit with our current strategy,” she continued.
Setting out the rationale behind the deal, the NetEnt CEO said: “Their revenues come from a broad range of customers, and they have a very large portfolio of games especially given that they’re a very young company.
“Red Tiger is licensed in the UK, in Malta, Gibraltar and Alderney. They are also certified in other regulated markets such as Italy, Denmark and Sweden. The company is also certified as a supplier in the Swiss market as of 1 July this year.”
In order to complete the acquisition, NetEnt has agreed to pay approximately £197m for all Red Tiger shares, with the remaining sum potentially becoming payable in 2022 based upon an earn-out basis, subject to financial performance over the coming two years.
This corresponds to a multiple of approximately 12 times current year EBITDA, with NetEnt’s income for the third quarter of 2019 set to include approximately SEK 55m (£4.6m) of transaction and financing related costs.
As explained on the conference call, Hillman expects that the integration of Red Tiger’s portfolio into NetEnt’s business model will create a “significant synergy” between the two, encouraging a new drive for innovation.
Hillman added: “Looking at their slot games, their table games and the other products that they have to offer, I would like to highlight that their slot games fit perfectly into our strategy with a growing portfolio that we can provide and offer into a number of different markets.
“We are very impressed by the big portfolio that they have. They also have great table games and their is a demand for more table games, especially across the US which offers a new opportunity for us.
“Red Tiger has strong jackpot products overall, they have SmartSpins, they have tournaments, and they have lots of interesting tools that we find will be great for a combined product.”
What came as a surprise to NetEnt, however, was the overlap in customers between the duo. Hillman expressed that the shared network of customers was not as large as initially predicted, which according to the NetEnt CEO, offered a number of new opportunities for the casino content developer.