Sega Sammy Buying GAN for $84M

Posted on: November 7, 2023, 09:57h. 

Last updated on: November 8, 2023, 11:22h.

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

Sega Sammy Creation (SSC), the Japanese company known primarily for its footprint in arcade and video games, is acquiring sports betting technology firm GAN Ltd. (NASDAQ: GAN) for approximately $84.4 million.

GAN stock
GAN stock advertised at the Nasdaq market site. The company is being sold to Japan’s Sega Sammy. (Image: Nasdaq)

The deal values the software provider at $1.97 a share, or a 121% premium to where the stock closed on Tuesday. GAN investors are scheduled to meet in the first quarter to vote on the transaction, which could be finalized by the fourth quarter of 2024.

If the merger is approved by GAN’s shareholders and is completed, all outstanding GAN ordinary shares will be acquired for $1.97 per share in cash; GAN’s ordinary shares will no longer be subject to public reporting requirements under the Securities Exchange Act of 1934; and its ordinary shares will no longer trade on any market. Upon completion of the merger, GAN will become a wholly owned subsidiary of SSC,” according to a statement.

GAN’s board of directors formed a special committee, comprised exclusively of independent directors, to consider and negotiate the offer. The gaming technology company was advised by investment bank B. Riley.

Sega Sammy Buy Ends GAN Downward Spiral

UK-based GAN went public in the U.S. about three and a half years ago, as sports wagering equities were taking the investment community by storm.

At that time, enthusiasm for sports betting stocks was at a fevered pitch, a point proven by GAN pricing its initial public offering (IPO) at $8.50, and flirting with $13 on its first day of trading. From there, the stock ripped higher, eventually approaching $32 a share in February 2021. From there, a prolonged slump ensued, resulting in Tuesday’s closing price of 89.1 cents. The stock has shed 43.91% of its value over the past 12 months.

“Formerly GameAccount Network, GAN provides?enterprise SaaS solutions for online casino gaming and sports betting applications, namely its GameSTACK internet gaming platform,” according to Renaissance Capital, an IPO research firm.

Sega Sammy’s plans for GAN remain to be seen. The Japanese company currently has no direct exposure to the regulated sports betting market in North America. But that segment is highly tech-dependent.

GAN Sale Not Surprising

GAN’s sale isn’t surprising. Earlier this year, the Irish company announced a strategic review “to evaluate options available to hasten our path to better profitability metrics and a more attractive return profile.” Such reviews often lead to sales.

Additionally, the sale to Sega Sammy isn’t surprising because that company previously took over a term loan from GAN creditor Beach Point Capital. Sega Sammy extended lower-interest credit to GAN as part of that transaction.

“After a thoughtful review of value creation opportunities available to us, we are pleased to have reached this agreement with SSC,” GAN interim CEO Seamus McGill in the statement. “Market share concentration in the U.S. B2C space, a slower than expected adoption of regulated online gaming in the U.S., 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.”