The Spin Palace Group
FAIRGROUND GAMING HOLDINGS PLC (“Fairground Gaming” or “the Company”)
ACQUISITION OF THE SPIN PALACE GROUP AND SUSPENSION OF TRADING ON AIM
The Directors of Fairground Gaming (“Directors”) are pleased to announce that
the Company has entered into a conditional purchase agreement to acquire all of
A brand of renowned online gaming websites owned and operated by the reputable Palace Group, Spin Palace started as an online casino back in 2001; since then it branched out into online poker and mobile gaming, developing a strong reputation as one of the most popular names in online gaming worldwide. Powered by Microgaming, which brings cutting edge technology and rich interface features, and a part of one of the largest and the most popular poker networks worldwide – Microgaming poker network, Spin Palace Poker provides its users with the most popular variants of their favorite game: Texas Hold’em, Omaha, Omaha Hi-Lo, 5 Card Draw, 5 Card Stud, 7 Card Stud and Razz, as well as Blaze Poker and a. Spin Palace Casino, a proud member of The Palace Group, is a fully licensed and award-winning online casino, which has opened its gates to all gaming enthusiasts in 2001, climbed its way to the top and managed to become one of the most popular online casinos on the internet.
the online gaming businesses and subsidiaries, which collectively form The Spin
Palace Group (“the Acquisition”) from Roundit Limited, (“the Vendor”), for a
maximum consideration of US$66m.
Highlights:
· The Acquisition is the first by Fairground Gaming since admission to AIM in
October 2005, is in line with the Company’s strategy and is conditional on
re-admission to trading of the enlarged issued share capital;
· The Spin Palace Group comprises two recently combined businesses, Spin
Palace and Piggs Casino, and is a licensed online casino and poker group
offering over 200 different games to a global customer base;
· Core domains include www.spinpalace.com, www.rubyfortune.com and
www.piggscasinos.com;
· The technology platform of the Acquisition is underpinned by Microgaming
considered by the Directors to be the leading provider of software to
online casinos;
· Scope for further integration and exploitation of new products;
· Existing management teams and staff to remain with the enlarged group
on completion of the Acquisition;
· Acquisition incorporates a marketing business and scalable call centre to
which the Vendor previously outsourced these functions as well as an
award-winning affiliate programme;
· Initial consideration of approximately US$46m, consisting of US$10m cash
payment from existing Fairground Gaming resources with the remainder
being satisfied through the issue of ordinary shares in Fairground Gaming
(“Ordinary Shares”) and warrants over Ordinary Shares (“Warrants”) in
Fairground Gaming;
· Further earnout consideration payable of up to US$20m, dependent upon
the EBITDA of The Spin Palace Group for the year to 31 December 2006;
and
· The Acquisition constitutes a reverse takeover for the purposes of the AIM
Rules and accordingly the Directors have requested that Fairground
Gaming’s shares be suspended from trading on AIM with immediate effect
until such time as an AIM admission document is published.
Commenting on the proposed Acquisition, Evan Hoff, Chief Executive of
Fairground Gaming, said: “The Spin Palace Group will be the cornerstone in the
execution of Fairground Gaming’s consolidation strategy. Both Spin Palace
and Piggs Casino are well managed and cash generative businesses and,
combined, we believe they have the potential to be scaled upwards to enhance
future revenues of the Company. We look forward to working with
management in growing the business and seeking
out complementary acquisitions that will assist us in achieving further scale and
product and geographic diversification. We look forward to providing further
information to investors in due course.”
Introduction
The acquisition of The Spin Palace Group, which is conditional on readmission of
the enlarged issued share capital of Fairground Gaming to AIM, is in line with the
Company’s stated strategy to take advantage of the trend for consolidation
within the online gaming sector in order to build a diversified portfolio of
online gaming businesses through a combination of strategic acquisitions
accompanied by subsequent organic growth.
The Spin Palace Group, first incorporated in 2001, is a licensed online casino and
poker group that possesses a global and diversified customer base. The Spin
Palace Group offers to its customers over 200 different online casino and poker
games. The Acquisition brings to Fairground a marketing and scalable call centre
capability as well as an award-winning affiliate programme. The principal online
gaming sites of The Spin Palace Group are www.spinpalace.com,
www.rubyfortune.com and www.piggscasinos.com.
The technology software to operate and develop the online casino and poker
games is supplied through an agreement with Microgaming.
The Acquisition constitutes a reverse takeover of Fairground Gaming under the
AIM Rules and therefore, in accordance with these rules, the Directors have
requested that the Ordinary Shares be suspended from trading on AIM with
immediate effect until such time as the Company publishes an AIM admission
document. It is anticipated that the AIM admission document, which will include
a notice convening an extraordinary general meeting (“EGM”) of shareholders at
which resolutions (“Resolutions”) will be proposed, inter alia, to approve, the
Acquisition, will be published during May 2006.
Upon the Resolutions being passed at the EGM (or any adjournment thereof).
Fairground Gaming intends to apply for the enlarged issued and to be issued
share capital to be admitted to trading on AIM subject to certain conditions being
satisfied. Dealings on AIM in the enlarged issued share capital should commence
as soon as practicable following the conclusion of the EGM. If the conditions of
the Acquisition are not satisfied, dealings in the existing Ordinary Shares will
resume trading on AIM as soon as practicable thereafter.
Terms of the Acquisition
Fairground Gaming, through its wholly owned subsidiary, FGH Acquisitions (Spin)
Limited, has conditionally agreed to acquire from the Vendor all of its online
gaming businesses and subsidiaries. The Acquisition has an effective date of 1st
January 2006, which is the date from which all revenues and costs, assets and
liabilities will accrue to Fairground Gaming. In accordance with normal accounting
practice however, the profit and loss accounts of the enlarged group will only
recognise income and expenditure of The Spin Palace Group from the date of
completion.
The maximum consideration payable to the Vendor under the terms of the
agreement is US$66 million. If the earnout target of US$9.8 million of earnings
before interest, tax, depreciation and amortisation (“EBITDA”) of The Spin Palace
Group for the year ending 31 December 2006 is achieved, the consideration paid
would represent an overall multiple of 6.7 times EBITDA.
The consideration is to be satisfied as follows:
· an initial consideration of approximately US$46 million equating to 8 times
the Spin Palace Group’s audited EBITDA for the year ended 31 December
2005 to be satisfied as to US$10 million in cash from existing resources
with the remainder being satisfied through the issue of Ordinary Shares
and Warrants; and
· a deferred consideration of up to US$20 million calculated on a sliding
multiple applied to The Spin Palace Group’s audited EBITDA for the year
ending 31 December 2006 to be satisfied as to not less than 25 per cent.
but not more than 50 per cent. in cash with the remainder to be satisfied
by either Ordinary Shares, Warrants and debt or a combination thereof.
Ordinary Shares to be issued to the Vendor as part of the initial consideration will
be issued at 75 pence per share and will be subject to lock-up and orderly market
arrangements. The Ordinary Shares to be issued to the Vendor as part of the
deferred consideration will be issued at a price per share equivalent to the lesser
of the average of the closing mid-market price Ordinary Shares from October to
December 2006 and the average of the closing mid-market price of the Ordinary
Shares in the 7 trading days prior to 31 December 2006 and will also be subject
to lock-up and orderly market arrangements.
The terms of the Acquisition require that the issue of Ordinary Shares to the
Vendor shall not result in the Vendor’s aggregate shareholding in Fairground
Gaming exceeding 29.9 per cent. of Fairground Gaming’s issued ordinary share
capital from time to time (the “Cap”). If the issue of Ordinary Shares pursuant to
the initial consideration or the deferred consideration would result in the Vendor’s
shareholding exceeding the Cap, then the Vendor shall receive in lieu thereof
such number of Warrants as would equal the number of Ordinary Shares that the
Vendor is entitled to receive. The exercise price for the Warrants is nil and all the
Ordinary Shares shall be issued fully paid. The Warrants are therefore exercisable
by the Vendor as the issued share capital of Fairground Gaming is enlarged
following further acquisitions and/or fundraisings.
Background to the Transaction
The stated strategy of the Company is to take advantage of the trend for
consolidation within the online gaming sector in order to build a portfolio of
online gaming businesses. The online gaming sector is highly fragmented
where only the major operators enjoy significant scale or brand recognition.
Against this background, the Directors believe that the operating model of
many companies within the online gaming sector is highly scalable providing
opportunities for greater efficiency cost savings upon consolidation.
The Directors consider that the Acquisition represents the first step in
implementing the Company’s strategy. Through the operation of online casinos
and online poker, the Acquisition generates two distinct lines of revenue and
sources of profit. The Spin Palace Group has achieved levels of organic revenue
growth comparable to other online gaming competitors and has implemented high
quality operating and management information systems.
The Spin Palace Group has a suite of management information systems, which
the Directors believe will help facilitate the integration of the Acquisition with
other future acquisitions.
As well as being fragmented, the online gaming sector is currently recording
substantial annual rates of growth. As the sector matures, the quality of the
brands offered by operators as well as their presence in the marketplace will be
crucial in determining those, which are successful. The Spin Palace Group
possesses several key brands through its online domains including
www.spinpalace.com, www.rubyfortune.com and www.piggscasinos.com,
highlighting the attractiveness of the Acquisition to the Company.
Information on The Spin Palace Group
The Spin Palace Group is a licensed online casino and poker group, which
possesses a global and diversified customer base. Unaudited management
accounts demonstrate that in 2004, The Spin Palace Group recorded an unaudited
Net Win (the difference between amounts wagered by active players and the
amounts paid out to active players minus bonuses paid out) of US$19.2 million in
2004 rising to US$29.9 million in 2005. The Spin Palace Group had approximately
9,300 active casino players (players who are playing for money) in March 2006
compared to 3,380 active players in March 2004 representing an annual
compound growth rate of 65%. The Spin Palace Group had approximately
2,100 active poker players (players who are playing for money) in March 2006
compared to less than 500 in March 2004 representing an annual compound
growth rate of 104%.
Approximately 97% of the Net Win revenue in 2005 was generated through the
online casino activities, which includes slots, roulette, baccarat and blackjack.
The Spin Palace Group Casino
Net Win revenues from Poker accounted for the remainder.
The Spin Palace Group offers its customers (who may use either a download or a
flash version of the software) over 200 different online casino and poker games.
The number of games offered by The Spin Palace Group is a key strength, helping
to maintain the number of active players using the websites.
The Spin Palace Group is also a member of the Microgaming Prima Poker
network, which provides a network of players with the ability to play poker online
against other poker players (www.primapoker.com).
The Directors of Fairground Gaming consider that the technological and
operational infrastructure, which underpins the operations of The Spin Palace
Group is highly scalable, thus allowing for significant economies of scale as
Fairground Gaming seeks to achieve both organic growth and growth through
strategic acquisitions. The Company also intends to make effective use of crossmarketing
opportunities between the online gaming sites.
The Spin Palace Group collectively comprises two separate businesses, Spin
Palace and Piggs Casino, which are both licensed by the Kahnawake Gaming
The Spin Palace Group
Commission in Canada’s independent Mohawk Territory of Kahnawake.
Current Trading
The latest management accounts of The Spin Palace Group indicate an unaudited
Net Win of US$9.7 million in Q1 2006, against US$7.8 million in Q4 2005,
representing quarter on quarter growth of 24%. Casino Net Win was US$9.4m
(US$7.6m in Q4 2005) and poker Net Win was US$0.34 million (US$0.28 million
in Q4 2005), representing growth of 24% and 21% respectively. Overall, Net
Win in Q1 2006 was 33% ahead of Net Win in Q1 2005, comprising growth in
casino Net Win of 30% and poker Net Win of 162%.
Spin Palace
The primary domains of Spin Palace are detailed below:
· Spin Palace Casino (www.spinpalace.com)
· Ruby Fortune Casino (www.rubyfortune.com)
· Spin Palace Poker (www.spinpalacepoker.com)
The flagship brand of Spin Palace is the Spin Palace Casino, which offers both
online casino and poker gaming comprising of over 173 games, including 19
progressive jackpots.
The secondary brand of Spin Palace is the Ruby Fortune Casino, which amongst
other objectives, is designed to appeal to the female customer segment of the
online gaming sector.
The Spin Palace Casino was awarded “Best New Casino” in 2002 from
Casinomeister, an independent body recognised in the online gaming industry as
an advocate for players. In 2002, it also won several awards from “Gambling
The Spin Palace Group Dubai
Online Magazine” based on readers’ polls. Ruby Fortune Casino was also given an
honourable mention by the “Gambling Online Magazine” in the 2005 award for
top new online casino.
In addition, Spin Palace utilises its own common affiliate programme, called
Wagershare (www.wagershare.com), which has received several awards including
the “Casino Affiliate Program of the Year” from Casinomeister in 2003 and 2004.
Spin Palace is accredited by the self-regulating industry body, eCogra (“ECommerce
and Online Gaming Regulation Assurance”) and has been awarded
eCogra’s players seal of approval.
Piggs Casino
The primary domains of Piggs Casino are detailed below:
· The Piggs Casino (www.piggscasinos.com)
· Jackpots In A Flash casino (www.jackpotsinaflash.com)
· Mummysgold (www.mummysgold.com)
· Poker333 Poker (www.poker333.com)
The flagship brand of Piggs Casino is The Piggs Casino, which offers both online
casino and poker gaming currently comprising 179 games, including 19
progressive jackpots.
The secondary brands of Piggs Casino being Jackpots In A Flash, Mummysgold
Casino and Poker333 were launched in order to promote cross marketing between
the online gaming websites, a direct response to the tendency for customers to
switch between websites.
Spin Palace Flash
Piggs Casino is accredited by the self-regulating industry body, eCogra (“ECommerce
and Online Gaming Regulation Assurance”) and has been awarded
eCogra’s players seal of approval.