Breaking News: FansUnite Acquires American Affiliate, Accelerating Entry into U.S. Gaming Market | Financial Buzz

Breaking News: FansUnite Acquires American Affiliate, Accelerating Entry into U.S. Gaming Market

FansUnite Entertainment ‎Inc. (OTCQX: FUNFF) (CSE: FANS) (“FansUnite” or the “Company“), is pleased to announce a definitive agreement dated November 22, 2021 (the “Definitive Agreement“) pursuant to which the Company has acquired (“Transaction“) the businesses and brands of American Affiliate LLC (“American Affiliate“). The Transaction will result in FansUnite securing a podium position in the U.S. online betting opportunity and will be the cornerstone of a larger U.S. affiliate strategy going forward.

American Affiliate Business

American Affiliate is a diverse collection of assets dedicated to generating new depositing customers for legal sportsbooks, online casinos, online poker sites, and adjacent products in the U.S. market.

American Affiliate’s vision blends an exclusive focus on the U.S. opportunity with marquee brands, a powerful omni-channel approach, a deep portfolio of proprietary technology, and a uniquely proven management team.

Transaction Highlights:

  • Accelerates Entry into U.S. Gaming Market: American Affiliates’ Betting Hero brand is the #1 live activation company in the U.S. sports betting and online gambling market.
  • Revenue and EBITDA Growth: American Affiliate has produced trailing 12 months unaudited revenue and EBITDA of US$13.1 million and US$6.0 million respectively.
  • High-Value Customer Base: American Affiliate’s assets have generated over 150,000 new depositing customers for legal U.S. online betting operators.
  • Partnerships with Tier-One Sportsbooks: Partnerships with leading sportsbooks and casinos including BetMGM, DraftKings, FanDuel, PointsBet, Underdog Fantasy, WynnBet, and more.
  • Strong Alignment with Existing Management and Shareholders: Consideration shares to be issued at a 42% premium to market price with share restrictions over a three-year period
  • U.S. Pure Play: The only at-scale affiliate company focused primarily on the U.S. market.
  • True Omni-Channel: A premier at-scale omni-channel affiliate in the U.S. market, combining marquee digital brands with a best-in-class live activation arm.
  • Leading Intellectual Property Portfolio: Category-leading portfolio of proprietary technology.
  • World-Class Executive Team: Tier-one executive and management team with a history of success and scale in the U.S. gaming market.

“The acquisition of American Affiliate represents the most significant milestone for FansUnite to date,” said Scott Burton, CEO of FansUnite Entertainment. “This transformative transaction will provide us further access to the lucrative U.S. regulated sports betting and online gambling market while generating accretive, high-margin revenue, expanding our leadership team, and accelerating the growth of our company’s footprint in the global gambling market.”

“When we looked at how quickly the U.S market is expanding, it made clear strategic sense for us to enter the affiliate business as a way to partner with some of the largest gambling companies in the world,” continued Scott Burton. “We will now own and operate an unparalleled customer acquisition portfolio, allowing us to leverage our technology, brands, and talent to immediately capture share in the U.S. sports betting and online gambling market.”

Combined, the American Affiliate brands represent one of the most significant single sources of new depositing customers for legal U.S. sports betting and online gambling operators. The leadership team has over 40 years of combined experience in the regulated gambling industry, including senior roles at market leaders such as ACEP, Amelco, DraftKings, Catena Media, and GeoComply.

Brands, platforms, content, and services highlighted in the Transaction include:

“Legal U.S. sportsbooks and online casinos are spending billions of dollars to acquire and retain customers,” said American Affiliate CEO Chris Grove. “Our brands, team, and technology allow us to capture a meaningful share of that marketing spend today while producing some of the highest margins in the U.S. online betting ecosystem.”

“But that success is only a starting point,” Grove continued. “We anticipate unprecedented near-term growth as legal online betting continues to expand into new states and new products. Joining with FansUnite was key to our strategy of aggressively scaling our business to meet that opportunity head-on.”

Investor Call

The executive teams from FansUnite and American Affiliate will be hosting a webinar to discuss the transaction on November 29, 2021 at 1:00PM EST.

Please click the link to register:
https://us02web.zoom.us/webinar/register/WN_79sLLGvjTmm9x8JuPs681w

A presentation outlining the transaction can be found:
https://www.fansunite.com/press/american-affliate-acquisition

Transaction Terms

Pursuant to the terms of the Definitive Agreement, the Company will acquire all of the issued and outstanding shares of American Affiliate for total consideration of approximately US$58.2 million subject to a working capital adjustment (the “Purchase Price“). The Purchase Price is comprised of: (i) US$13.5 million in cash paid on closing; (ii) US$41.7 million in common shares of FansUnite, to be settled through the issuance of common shares of the Company (the “Common Shares”); (iii) deferred cash payments of US$3 million payable in twenty four months. In addition to the Purchase Price, the Definitive Agreement provides that the principals of American Affiliate may receive earn-out consideration to be calculated according to EBITDA targets with minimum margin guarantees each fiscal quarter for the three year period following closing.

For additional information on the terms of the Transaction, please refer to a copy of the Definitive Agreement which will be filed on SEDAR under the Company’s profile within the prescribed timeframe.

The Purchase Price satisfied through the issuance of the Common Shares will be issued at CAD$0.75 per Common Share, representing a premium of 42% over the FansUnite Share closing price, and a premium of 39% over the FansUnite Share 10-day VWAP, as at November 19, 2021, the last trading day immediately prior to the initial announcement of the Transaction.

The Common Shares issued pursuant to the Transaction will be subject to a contractual lock-up ranging from up to 25% of the Common Shares released on months 4, 6, 9, 12, 15, 18, 21, 24, and up to 3.0% releasing on month 27, 30, 33, 36, pursuant to the terms of the Definitive Agreement.

Stifel GMP acted as financial advisor to FansUnite and DLA Piper LLP acted as legal advisor. Stifel GMP will be paid a fee in cash and 866,887 Common Shares for its services.

Roth Canada, ULC (“Roth“) has provided a fairness opinion in connection with the Transaction to FansUnite’s Board of Directors (the “FansUnite Board“) to the effect that, as of the date of the opinion and based upon and subject to certain assumptions and limitations, the consideration payable by FansUnite is fair, from a financial point of view, to FansUnite. Roth will be paid a cash fee in exchange for its services.

A director of the Company, Chris Grove, is a “related party” of American Affiliate, therefore the Transaction is a “related party transaction” as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101“). Accordingly, the Company is relying on the exemptions from the valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101, given that neither (A) the fair market value of the subject matter of, nor (B) the fair market value of the consideration for, the Transaction, insofar as it involves interested parties, exceeds 25% of the market capitalization of the Company, as determined in accordance with MI 61-101. The Transaction has been approved by the independent directors of the Company.

About FansUnite Entertainment Inc.

FansUnite is a global sports and entertainment company, focusing on technology related to regulated and lawful online gaming and other related products. FansUnite has produced a one-of-a-kind complete iGaming platform, with a sports and esports focus geared for the next generation of online bettors and casino players. The platform includes products for pre-match betting, in-play betting, daily fantasy, content and a certified RNG to produce casino style chance games. The platform operates multiple B2C brands and B2B software for the online gambling industry. FansUnite also looks to acquire technology platforms and assets with high growth potential in new or developing markets. The Company also provides technological solutions and services in the global gaming and entertainment industries. Its technology includes fixed/parimutuel odds, in-stream betting, live betting, casino-style games, cryptocurrency wallet and news content.

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