Sega Sammy to Acquire GAN for $107.6M

Japanese gaming giant Sega Sammy has recently announced their intention to acquire gaming technology and software provider GAN for a total sum of approximately $107.6M. 

According to the terms of this deal, Sega Sammy will pay $1.97 for each share pertaining to GAN. This results in a premium of 121% over the closing price of the software provider’s ordinary shares as of market close on 7th November 2023. 

The approval of this deal by GAN shareholders will take place at the shareholder meeting that is set for March 31st, 2024. 

Sega Sammy has recently announced that, should all required approvals be secured, this deal is set to be closed by December 2024. 

Upon all required approvals and the subsequent completion of this merger, GAN Limited will become a wholly owned subsidiary of Sega Sammy Creation (SSC). 

Comments made on behalf of Sega Sammy

In direct reaction to the forthcoming closure of this deal, Japanese gaming giant Sega Sammy has announced that the acquisition of GAN Limited will have a tremendous impact on their ability to expand their gaming business and to widen their gaming portfolio. 

With regards to this, Sega Sammy remarked on the following: 

“We decided to proceed with this acquisition because it aligns with our growth strategy. We believe it will greatly contribute to the expansion of our gaming business and gaming portfolio. 

“The complementary nature of GAN’s market leading online gaming technologies and solutions and the customer base and content development capabilities of SSC, which provides gaming equipment and content to land-based casino operators in North America, is expected to result in increased distribution of SSC’s compelling casino content and expanded customer-reach.” 

Comments made on behalf of GAN

Seamus McGill, chairman and interim CEO at GAN Limited, has recently made the following comment regarding the foreseeable closure of this massive deal: 

“After a thoughtful review of value creation opportunities available to us, we are pleased to have reached this agreement with SSC. 

“Market share concentration in the US B2C space, a slower than expected adoption of regulated online gaming in the US, along with changes to key customer contracts make the near-term operating environment challenging without ample capital resources. 

“Sega Sammy has those resources and GAN is a strategic complement to their existing gaming portfolio. We believe this all-cash offer, at a substantial premium to recent trading prices, is the value-maximizing path for our shareholders.” 

In addition to this, McGill remarked on how this all-cash offer made to GAN by Sega Sammy exhibits a ‘value-maximizing path’ for all their shareholders. 

Sega Sammy’s Intention: US Expansion 

As more states in the US are opting to legalize iGaming in their jurisdictions and legalized iGaming becomes more widespread in this country, Sega Sammy Holdings Inc. eyes the potential expansion of their gaming business in the United States with greater interest. 

This deal with software developer GAN Limited provides ample room for this potential expansion, allowing Sega Sammy, as they have declared, to identify ‘promising’ growth opportunities in the US. 

The expectation held by Sega Sammy is that existing operators in the United States will expand and new operators pertaining to the iGaming industry will enter the online gaming market. In this way, the company’s forthcoming acquisition of gaming technology provider GAN will aid them in capitalizing on this expansion. 

With regards to this, Sega Sammy released the following statement: 

“Sports betting, which has been legalized in many states, is a high-profile market with increasing competition, a growing user base, high customer acquisition costs, and diverse needs. While the U.S. iGaming market is still limited to six states, there are ongoing discussions around legalizing iGaming in additional states. 

If we can enter the U.S. iGaming market before broad legalization, it could provide a promising opportunity to grow our presence in the U.S. iGaming market.” 

In the event that this $107.6M deal would be approved, GAN would merge with Sega Sammy’s special purpose company: Sega Sammy Creation (SSC). Following this merger, GAN would result in being the only surviving corporation. 

The Reasoning behind Sega Sammy’s Choice for an Acquisition Target: GAN Limited 

There are multiple potential reasons behind Sega Sammy’s choice of GAN Limited as an acquisition target that would both benefit and aid them in progressing their goal of expanding their gaming business in the United States: 

• GAN Limited’s player account management system was described as ‘market-leading’. 

• GAN is a remote gaming server. 

• A merger with GAN would result in the acquisition of both the B2C brand Coolbet and the game development studio Silver Gaming. 

• GAN is a turnkey online gaming software provider. 

Sega Sammy’s Acquisitions 

The announcement pertaining to Sega Sammy’s definitive acquisition of GAN Limited comes just a few months following the completion of another major deal in the iGaming space.  

During August of this year, this Japanese gaming giant announced their purchase of Rovio Entertainment for a total of €706.0M. The business that was acquired is the developer behind the Angry Birds franchise. 

Earlier this year, there was already opened talks between Sega Sammy and Rovio Entertainment, however they were faced with plenty of competition from other interested parties, chief of which being Playtika, a digital entertainment company who made several offers for the business.  

The CEO of Playtika, Robert Anokol, made a statement in which he professed how the closure of this deal would be immensely valuable for Rovio’s stakeholders, however, later that year, Playtika pulled out of any further discussions, leaving ample room for Sega Sammy to swoop in and strike a deal with Rovio Entertainment just weeks later. 

More about Sega Sammy

Sega Sammy Creations (SCC) is a subsidiary of Japanese gaming and entertainment giant Sega Sammy Holdings Inc., an international conglomerate operating in the entertainment, gaming, and resorts businesses.  

The definitive agreement that has been struck involves the merger between GAN Limited and Sega Sammy’s subsidiary: SCC. 

Sega Sammy was initially founded back in 2004 as a result of the merger between Sega and Sammy corporations. 

Haruki Satomi, the President and Group CEO, Representative Director of Sega Sammy, made the following statement: 

“We recently formulated a long-term vision for the SEGA SAMMY Group, with the fiscal year ending March 2030 as the target year. Our mission under that vision is to be "Constantly Creating, Forever Captivating”—aiming to be a game changer and bring energy and color to society by continually creating exhilarating experiences. Our goal is to contribute to the enrichment of the social environment and the creation of culture through sustainable management, while also achieving continual improvement in corporate value.” 

The company supplies its gaming content and equipment through its Sega Sammy Creation (SSC) arm and operates an integrated resort through Paradise City that is located in Japan. Among others, Sega Sammy offers the following: 

• Consumer games 

• Amusement machines  

• Animation production 

• Toys 

• Pachinko and Pachislot machines 

• Integrated resort and resort facilities 

Sega Sammy Holdings Inc. describes itself as follows: 

“The SEGA SAMMY Group is mainly comprised by the Entertainment Contents Business, which offers a diversity of fun through consumer and arcade game content, toys and animation; the Pachislot and Pachinko Machines Business, which conducts everything from development to sales of Pachinko/Pachislot machines; and the Resort Business, which develops and operates hotels. 

We will continue to invent new-added value and offer captivating experiences to people around the globe by creating synergies as a group while each business builds its own unique position in its field.” 

Financial Challenges faced by GAN Limited 

Last year, GAN Limited faced significant financial challenges, releasing a report stating that the total losses sustained during this time amounted to $197.5M. This financial report marked a significant increase in losses when compared to those sustained the previous year: $30.6M. 

GAN attributed a major portion of these losses to a write-down in the value of their B2C brand, Coolbet. 

With regards to this, they stated that the “market price of our publicly traded shares and resulting market capitalization of our business has experienced a significant and sustained decline since our acquisition of Coolbet.” 

In an attempt to counteract these financial struggles, GAN implemented a number of cost-saving measures, including staff and cost reductions, the renegotiation of credit facilities, and the identification of new sources of capital. 

It was during this time that Sega Sammy first became involved with GAN’s operations, refinancing GAN’s corporate debt in April 2023. 

In recent months, it appeared that the future of GAN Limited was rather uncertain. In their Q1 financial report, the company had launched a strategic review in which they took a look at a ‘range of strategic alternatives’ that would ultimately improve value for GAN’s shareholders.  

In September of this year, GAN released another update in which they remarked that all options were being considered. Amongst these options, the provider was considering the potential sales of parts of or the entire company. With regards to this, GAN had stated that they had spoken to a number of interested parties in their Q2 financial report. 

In addition to this announcement, GAN announced the exit of Dermot Smurfit, the CEO of GAN who had been at the helm of the company for more than 21 years. 

The replacement of Smurfit was also declared in this statement, with Seamus McGill being appointed as chairman and interim CEO at GAN Limited. 

More about GAN

GAN Limited, a gaming and technology software provider, is one of the leading B2B technology providers located in North America that offers end-to-end solutions for online gaming. 

GAN is a provider of real-money internet gaming solutions and is also a leading international B2C operator of internet sports betting in the United States. 

In addition to this, GAN is a Nasdaq-listed Software as a Service provider for casino operators in the United States, as well as an online gaming operator in Europe and South America. 

Among others, GAN Limited offers the following services: 

• Sportsbook 

• Simulated Gaming 

• Regulatory Compliance 

• Real-Money iCasino 

• Marketing Services 

• Operational Support 

• Custome Game Development 

• Customer Services 

• Loyalty Integration 

• Super RGS 

GAN describes itself in the following manner: 

“GAN is well recognized for our innovative, award-winning platform GameSTACK™. Our continued focus & development on this platform’s capacity continues to support the needs of brick-and-mortar operators. From Play-For-Fun Simulated Gaming and Real Money iCasino, to Retail and Online Sportsbook, GAN’s platform centers around our partners, and their desire to enhance their relationship with their players online and on-property.”