MTG acquires leading word games developer PlaySimple and discloses pro forma figures for its gaming vertical

Stockholm
July 2, 2021
09.15 AM CEST

STOCKHOLM, July 2, 2021 – Modern Times Group MTG AB (publ) (“MTG”) today announces the acquisition of 100 % of PlaySimple, a leading word games developer from India. PlaySimple is a rapidly growing, highly profitable business and one of the global leaders in the attractive mobile word games genre. The up-front consideration amounts to approximately SEK 3,090 million (on a cash and debt free basis) and performance based earn-out payments amount to an expected value of SEK 1,287 million in aggregate. Since December 2020, MTG has with the acquisitions of Hutch, Ninja Kiwi and now PlaySimple accelerated the buildup of a highly attractive gaming vertical which on a pro forma basis generated revenues of approximately SEK 4,421 million in 2020 and SEK 1,158 million in Q1 2021 with monthly (MAU) and daily active users (DAU) of approximately 30 and 6 million respectively.

Stockholm
July 2, 2021
09.15 AM CEST
Highlights:
  • MTG will through its subsidiary MTG Gaming AB - referred to as ‘GamingCo’ in previous MTG announcements - acquire 100 % of the shares in PlaySimple for a total consideration of approximately SEK 3,090 million (USD 360 million) excluding performance based earn-outs, on a cash and debt free basis
  • The intention is to pay the upfront consideration 77 % in cash and 23 % in MTG class B shares. MTG will call for an Extraordinary General Meeting to resolve on the consideration shares
  • PlaySimple is one of India’s leading game developer and publisher, and is one of the global leaders in the fast-growing mobile word games genre
  • PlaySimple grew its revenues by 144 % in the 2020 calendar year to SEK 706 million (USD 83 million) with an adjusted EBITDA of SEK 154 million (USD 18 million). The strong momentum has continued into 2021 with estimated H1 revenues of SEK 510-540 million (USD 60-64 million), up approximately 82 %, and an estimated adjusted EBITDA increase of 140 % to SEK 145-155 million (USD 17-18 million), compared to the corresponding period last year
  • PlaySimple has a live portfolio of nine games, including successful titles such as “Daily Themed Crossword”, “Word Trip”, “Word Jam”, and “Word Wars” with over 75 million installs and 7 million MAU. The company also has four additional new games in the pipeline to be launched in 2021, and is expanding into the card games genre
  • The company has been especially successful in reaching and become popular with the growing audience of female gamers, which today makes up close to 80 % of its total player base
  • MTG has through recent acquisitions of Hutch, Ninja Kiwi and PlaySimple materially increased its size to become a well-diversified scale player in the gaming space with pro forma revenues for MTG’s gaming vertical of approximately SEK 4,421 million for 2020 and SEK 1,158 million for Q1 2021

MTG’s Group President and CEO Maria Redin commented:

“We’re very happy to welcome PlaySimple to our family of gaming companies. PlaySimple is a rapidly growing and highly profitable games studio that quickly has established itself as one of the leading global developers of free-to-play word games, an exciting new genre for MTG. An experienced management team and focused, data driven operating model has allowed PlaySimple to develop multiple game hits especially popular with the growing global audience of female gamers. What’s more, the company has a pipeline of several exciting new games, some of which are card games, a new genre for PlaySimple.

PlaySimple’s ad-tech and cross promotion competences which have played a pivotal role in their own journey can in time allow us to accelerate the growth of our whole gaming vertical. Expanding our geographical footprint into the Indian subcontinent will also provide access to one of the best talent pools in the world.

Acquisitions are a strategic part of our value creation story. Through the acquisitions of Hutch, Ninja Kiwi and now PlaySimple, MTG has built a highly attractive games portfolio that is significantly more diversified in terms of genres, audiences, and revenues, which provides improved visibility, stability and opportunities.”

PlaySimple’s co-founder and CEO Siddharth Jain commented:

“We’re delighted to join the MTG family - MTG’s approach to investments offers us creative freedom, and the opportunities created by the GamingCo really resonate with our team. We’re excited to have found a new home for our company, one where our team can learn and grow alongside our fellow companies.”

Co-founders and management team members Siddhanth Jain, Suraj Nalin and Preeti Reddy jointly commented:

“We’re very proud of the games we’ve developed over the years, and of the infrastructure and scale that we’ve achieved with our team. As we join the MTG family, we look forward to leveraging our proprietary technology across MTG’s gaming portfolio, expanding into the European market, investing in cutting-edge technology and building exciting new games.”

Background and rationale for acquisition

The acquisition of PlaySimple marks an important next step in the build-up of a diversified gaming vertical with high-quality gaming companies and is in line with MTG’s strategy to drive value creation through organic growth and strategic M&A. Scaling and diversifying the GamingCo helps to accelerate the operational performance while at the same time creating a more stable business.

The acquisition of PlaySimple is a perfect fit for MTG as it will significantly strengthen the company’s position in the casual games’ genre and enable access to the fast-growing word games genre. PlaySimple will strengthen MTG's position amongst the female gaming audience while also enabling access to the strategically important talent pool in India.

PlaySimple is one of India's most exciting and fastest growing mobile gaming companies. The company has a highly experienced and data driven management with a proven track-record of developing multiple highly successful free-to-play games with over 75 million installs and 1.9 million DAU across its titles. PlaySimple has developed best in class advertising infrastructure, providing opportunities for improved monetization, more efficient user acquisition and cross-promotion throughout MTG's gaming vertical.

Following the acquisition of PlaySimple, MTG’s gaming vertical has become a truly diversified global gaming group with companies across Europe, North America, and Australasia. The gaming vertical now holds strong positions in the city building and strategy genres through InnoGames, mobile racing through Hutch, idle games through Kongregate, tower defense through Ninja Kiwi, and word games - with card games soon to follow - through PlaySimple.

About PlaySimple

PlaySimple (www.playsimple.in) is a developer and publisher of high quality free-to-play mobile word games and has its head office in Bangalore, India. The company was founded in 2014 by brothers Siddharth Jain and Siddhanth Jain - with fellow co-founders Preeti Reddy, and Suraj Nalin. The management team has extensive experience from the gaming industry with experience notably from Zynga.

Today, PlaySimple has approximately 215 full-time employees and is one of India’s most exciting and fastest-growing mobile gaming companies with a vision to create simple, impactful casual game experiences at massive scale, powered by a best-in-class tech and analytics infrastructure. Since inception, PlaySimple has built a worldwide network of chart-topping games with over 75 million installs across its titles to-date, which consists of evergreen hits like Daily Themed Crossword, Word Trip, Word Jam, Word Wars, Word Trek. Additionally, the company has four new games in pipeline to be launched during 2021, of which two are card games, a new genre for PlaySimple.

PlaySimple's most successful title to date, Daily Themed Crossword is currently the top grossing game at PlaySimple. Launched 3 years ago, it has a large archive of fun, themed crossword puzzles that entertain and challenge the company’s players daily. This casual take on classic crosswords appeals to all age groups and has entertained over 11

million players worldwide. Over the years, exciting new game modes and puzzle formats have been added to keep things engaging for the players. Early backers of the company were venture capital funds Elevation Capital and Chiratae Ventures who are all selling their stakes in the company as part of the transaction.

PlaySimple unaudited financials

Net revenues for calendar year 2020 amounted to approximately SEK 706 million (USD 83 million), corresponding to a growth rate of 144 % over 2019. PlaySimple generated an adjusted EBITDA of SEK 154 million (USD 18 million), corresponding to a margin of 22 % and 2020 EBIT of SEK 148 million (USD 17 million). The strong trend seen during 2019 and 2020 has continued into 2021 with estimated H1 revenues of SEK 510-540 million (USD 60-64 million), up approximately 82 %, and an estimated adjusted EBITDA increase of 140 % to SEK 145-155 million (USD 17-18 million), compared to the corresponding period last year. Please note that PlaySimple financial statements are unaudited and may not be comparable with MTG's accounting standards.

MTG GamingCo unaudited pro forma financials

Unaudited 2020 and Q1 2021 pro forma figures for MTG’s gaming vertical are shown below. The purpose is to provide an understanding of selected financials as if the acquisitions had been completed per 1 January 2020. MTG has carried out a preliminary IFRS conversion of PlaySimple’s financials for the purpose of the pro forma statements. All numbers are preliminary and unaudited.

CY 2020 (SEKm) MTG Gaming as reported Hutch Ninja Kiwi PlaySimple MTG Gaming pro forma
Net sales 2,682 639 337 763 4,421
Adj. EBITDA 800 159 168 166 1,293
Adj. EBITDA margin % 30% 25% 50% 22% 29%
Q1 2021 (SEKm) MTG Gaming as reported Hutch Ninja Kiwi PlaySimple MTG Gaming pro forma
Net sales 767 included 141 250 1,158
Adj. EBITDA 204 included 75 65 344
Adj. EBITDA margin % 27% included 53% 26% 30%
Consideration and financing

MTG will through its subsidiary MTG Gaming AB acquire 100 % of the shares in PlaySimple for a total consideration of approximately SEK 3,090 million (USD 360 million) excluding earn-out, on a cash and debt free basis. The intention is to pay the upfront consideration of 77 % in cash and 23 % in MTG class B shares.

Due to Indian foreign exchange regulations, the acquisition will be completed in two steps. Under the first step, which is expected to be completed on or around July 29, MTG will acquire 77 % of the shares in PlaySimple. The second step will be completed following regulatory approval for the founders to receive the share consideration whereby the founders will receive 6,194,343 MTG class B shares (the “Consideration Shares”) in exchange for the remaining shares in PlaySimple (equivalent to a value per MTG class B share of SEK 115.16, which equals the 20 day volume weighted average price of MTG class B shares on Nasdaq Stockholm up to and including 1 July 2021, and using the FX rate USD/SEK of 8.582 as of 1 July 2021). The Consideration Shares will be subject to lock-up undertakings for up to 24 months. If founders do not obtain approval to receive the Consideration Shares by October 31, 2023, MTG will acquire the remaining shares in PlaySimple against cash consideration equivalent to the value of the Consideration Shares at such time. MTG will call for an Extraordinary General Meeting to issue MTG class C shares that will be held in treasury until regulatory approval is obtained at which point MTG class B shares (converted from class C shares) will either be transferred to the PlaySimple founders in exchange for the remaining shares or, if approval to receive the Consideration Shares is not obtained, sold to cover the cash payment. Any issued class C shares will be considered deducted from the authorization for the MTG Board of Directors to resolve on new issues of class B shares which was resolved by the Annual General Meeting held on 18 May 2021.

The transaction is structured to align MTG and PlaySimple’s long-term economic incentives and includes an earn-out component (“Earnout”) which is based on PlaySimple’s future financial performance in 2021-2025 payable over the same period. The total earnout is estimated at SEK 1,287 million (USD 150 million) and will be paid in cash.

The Consideration Shares represent 5.3 percent of the shares and 5.1 percent of the votes in MTG, on a fully diluted basis. By issuing the Consideration Shares to the selling shareholders, the number of shares and votes would increase by 6,194,343 and 6,194,343 respectively.

The up-front cash consideration paid for PlaySimple will be financed through existing cash held by MTG, a secured revolving credit facility of SEK 1,000 million with a 24-month tenor, extendable up to 36 months (any extension is subject to lenders’ approval) and a bridge loan facility of SEK 1,000 million with a tenor of 12 months (the “Bridge Loan Facility”). Both credit facilities are provided by DNB Bank ASA, Sweden Branch and Swedbank AB (publ). MTG has appointed advisors and will evaluate the most attractive refinancing alternatives for the Bridge Loan Facility, including but not limited to bond financing.

Conditions and time plan for the acquisition

Completion of the first step of the acquisition of PlaySimple, where MTG will acquire 77 % of the shares in PlaySimple is expected on or around July 29, 2021. The second step will be completed following regulatory approval.

Invitation to conference call

An audio cast conference with the opportunity for dial in participants to ask questions will be held today, Friday July 2, at 10.00 am CEST with MTG’s Group President and CEO Maria Redin, CFO Lars Torstensson and EVP Gaming and Esports Arnd Benninghoff presenting.

Sweden, Stockholm +46 (0) 856 618 467
United Kingdom +44 (0) 844 481 9752
United States, New York +1 646 741 3167
Std International Dial-In +44 (0) 2071 928338

Confirmation Code: 6327926 - the presentation is also audiocasted “listen only” on link: https://edge.media-server.com/mmc/p/e8pvjhiq

Advisors

MTG has appointed Ernst & Young as financial advisor and Norton Rose Fulbright (UK), J. Sagar Associates (India) and Gernandt & Danielsson Advokatbyrå (Sweden) as legal advisors in connection with the Transaction.

PlaySimple have in connection with the Transaction appointed Aream & Co as financial advisor, Cyril Amarchand Mangaldas and Khaitan & Co as legal advisors and PWC as tax advisors.

This information is information that MTG is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out below, at 09.15 am CEST on July 2, 2021

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