The decision to acquire the Red Tiger Gaming Limited, a fast-growing online slot supplier, is seen as a big boost to Net Entertainment as it seeks to turn things around in the gaming industry. As highlighted in topnetent-casinos site, this move defines NetEnt's turning point.
Resolution to Acquire Red Tiger
After careful considerations, NetEnt resolved to acquire Red Tiger. This was, Net Entertainment would take full responsibility and control of the Red Tiger Gaming which is a firm specialized in slot machine production. As captured in themainesurfschool.com , acquisition of Red Tiger would be done in two phases: :
- Cash acquisition initial value: 197 million Euros
- Profit payable in 2022: up to 23 million Euros
This brings the total worth of Red Tiger to 220 million Euros at the point of acquisition. It is undeniable that this is, in essence, the first major acquisition of this company that is listed in Stockholm. This acquisition is sure to combine two innovative, leading gaming companies.
Alignment of Changes and Integration with Growth Strategy
NetEnt's primary strategy is to consistently and constantly make real improvements in the aspect of their business. As such, their integration with Red Tiger and the subsequent changes after their move is clearly in line with this strategy. Their focus revolves around strengthening competitiveness and increasing value creation.
The restructuring that would follow after the acquisition was estimated to enable an annual cost-saving to the tune of SEK 150 million. beginning the 2nd half of the year. as a result, Net Entertainment would its anticipated annual cost synergies to the tune of SEK 250 million.
The Impact of the Acquisition of Red Tiger on NetEnt Workforce
After announcing its decision to implement its integration with Red Tiger, NetEnt went further downsize its workforce. This saw the enlarged workforce cut down by 120 employees who were based in NetEnt's Malta and Stockholm offices. NetEnt CEO noted that the acquisition exceeded the expectation of the management.
The CEO went ahead to report that the integration would offer great potential for economies of scale, increased efficiency, and further synergies. According to the CEO, the changes would result in the relocation of several functions in both Malta and Stockholm. The 120 full-time jobs became redundant.
Special Announcement From NetEnt CEO
NetEnt further made a striking announcement that its earn-out consideration of Red Tiger was pending a redemption through a directed issue of cash payments and new shares. using the discounted net present value, the financial liability item was pronounced. the increase in the financial costs resulted in:
- The early redemption
- SEK 35 million increase in early 2020
The aforementioned amount, however, has no impact on the cash flow. NetEnt's debt is likely to decrease by MSEK 100 million following the rights issue. This will not only see it fulfill its ambitions but also make things a lot better for both the employees and game enthusiasts.
Covid-19 Impact on NetEnt-Red Tiger Marger
Although the effects of covid-19 are seemingly quite difficult to forecast, there has been so far no negative impact of the pandemic on NetEnt. Since its outbreak, the pandemic has seen many giant companies close their door. The effect has equally been felt in the gaming industry.
During the first quarter of 2020, there was a significant development in NetEnt Group's revenues. These have been in line with the expectations of the market. the revenues are anticipated to an approximate range of between SEK 490 and 500 million. NetEnt can only hope that things won't worsen.