Golden Matrix Group, Inc. (NASDAQ:GMGI), a developer of online gaming platforms, announced it is acquiring MeridianBet Group for $300 million in cash and stock.
The deal, which is expected to close in the first half of this year, will expand Las Vegas-based Golden Matrix’s foot print in rapidly growing business-to-consumer (B2C) markets in Africa, Europe and Latin America.
The combined pro forma revenues of both companies are expected to be greater than $100 million in FY2022, with an EBITDA estimated to be greater than $22 million for the pro forma year ended 31 October, 2022, making the combination financially appealing and earnings-accretive,” according to a statement issued by the companies.
Golden Matrix has been looking for expansion opportunities and avenues for adding exposure to new international markets — boxes checked by the acquisition of privately held MerdianBet.
Golden Matrix Investors Need Some Convincing
As is often par for the course, the buyer’s shares declined on news of the acquisition with Golden Matrix tumbling more than 7% today on volume that was nearly quadruple the daily average.
Specific to Golden Matrix, today’s declines could be the result of profit-taking as the stock surged 61% year-to-date. Investors may also be concerned about the $300 million price tag on the MeridianBet deal considering that the buyer’s market capitalization was just $117.18 million entering today. That’s well into micro-cap territory.
Investors may move past the price point of the deal if the purchase bears fruit for Golden Matrix. That’s possible because the combined company could deliver big growth.
“MeridianBet Group with a strong B2C presence in European, Latin America (LATAM), and African sports betting markets – and over 38% year-on-year revenue growth, Fiscal Year 2022 over 2021 – combined with Golden Matrix’s business-to-business (B2B) gaming platforms supporting over 6.8 million registered users is expected to result in complementary aspects of the business and a significant increase in market share for both companies,” according to the statement.
Golden Matrix/MeridianBet Deal Terms
Under the terms of the transaction, MeridianBet investors will receive 65.3 million common shares of Golden Matrix valued at $3.50 apiece. That’s a slight discount to the stock’s closing price today of $3.80. The target is also receiving $70 million in cash.
“The strategic rationale behind the deal and becoming part of a Nasdaq-listed company is to be more competitive and successful in Brazil, the United States and other large markets – where market entry for private companies is more challenging,” said MeridianBet CEO Zoran Milosevic in the statement.
When the acquisition is completed, MeridianBet and affiliated entities will become wholly owned subsidiaries of Golden Matrix and the buyer’s name will remain in place.
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