GAN Buying Coolbet for $175 Million, Adds Online Sportsbook Platform

Posted on: November 17, 2020, 09:21h. 

Last updated on: November 17, 2020, 12:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gaming technology provider GAN Ltd. (NASDAQ:GAN) is bolstering its business-to-business (B2B) offerings. The company says it will acquire Vincent Group Plc, also known as Coolbet, for $175 million in cash and equity.

GAN Coolbet
GAN CEO Dermot Smurfit (left) and former CFO Desmond Glass, seen here in 2016. The company is buying Coolbet for $175 million. (Image: Irish Times)

UK-based GAN said the transaction will be funded with $95 million in cash and $80 million in stock. That transaction is slated to close in the first quarter of 2021.

The cloud computing firm said it’s getting a good deal on Coolbet, which is one of the fastest-growing iGaming and sportsbook operators in Europe.

We believe this acquisition is being undertaken at a highly attractive valuation, relative to the opportunity to rollout B2B sports betting services in the US,” said GAN CFO Karen Flores on a conference call with analysts and investors. “We have undertaken to acquire Coolbet for approximately $175 million, which represents 3.5 times 2021 forecasted revenue.”

Over the trailing 12 months, Coolbet notched revenue of almost $31 million, as its top line grew at a compound annual growth rate (CAGR) of 46 percent from 2018 through 2020, notes GAN.

‘Compelling Purchase’

In what Flores calls a “compelling purchase,” GAN will leverage Coolbet technology into services the former currently markets to US-based clients.

Coolbet offers live money sports wagering and internet casino services. When the company started, its most prominent market was Northern Europe. But it since expanded to Canada and Latin America. The operator has customers in Norway, Sweden, Finland, Iceland, Estonia, and Chile, and recently expanded into Canada and Peru, notes GAN. It has over 84,000 active customers.

The deal, which GAN says will be accretive to earnings, gives the buyer an avenue for bolstering its offerings targeted at iGaming and sportsbook operators, two of its marquee clientele in the US.

With some analysts saying the US internet casino/sports betting opportunity could reach $30 billion at maturity, GAN’s latest acquisition could prove prescient.

Additionally, Coolbet was slightly profitable on the basis of earnings before interest, taxes, depreciation and amortization (EBITDA), and sported break-even operating income through the first nine months of this year. The company has no debt.

“The timing of the acquisition ideally positions GAN to leverage its growing customer base, as well as the momentum that sports legislation has seen with the election results in Maryland, Louisiana, South Dakota, and Tennessee,” said GAN CEO Dermot Smurfit in a statement.

News Weighs on Shares

The Coolbet transaction could pay off for GAN in the future. But at least for today, investors are cool on the idea, as the stock is lower by almost 16 percent on volume that’s already more than double the daily average. The company said it will raise capital to fund the acquisition.

Compounding shareholders’ woes Tuesday were comments from GAN in its earnings release. It said that a prominent client used its own digital wallet during a recent online sports betting launch instead of the comparable GAN solution.

The company declined to identify the client. But there’s speculation it’s Penn National Gaming, which used a proprietary digital wallet for the recent launch of the Barstool Sportsbook app in Pennsylvania.