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UPDATE: MTG Completes Hutch Acquisition

M&A | ANNOUNCEMENT DATE: 18 DEC 2020
WRITTEN BY | 21 Dec 2020
UPDATE: MTG Completes Hutch Acquisition
M&A

💵 Acquisition

  • Stockholm-based strategic and operational investment holding company in esports and gaming Modern Times Group (ST:MTGA and MTGB) has completed the acquisition of London-based mobile games developer and publisher Hutch for up to $375m, including:

    • $275m up-front consideration paid primarily in cash, which will be financed through existing cash that MTG holds and ~$213m new bridge loan facility with a tenor of 12 months provided by Sweden-based DNB Bank Asa

    • up to $100m of an earn-out consideration, paid in cash, based on Hutch’s financial result in 2021-2024

  • The acquisition was made via a newly created holding company for MTG’s gaming business (including InnoGames, Kongregate and Hutch) GamingCo. MTG owns 77.35% of all shares in GamingCo, while the remaining shares are held by the InnoGames founders

  • With the acquisition MTG adds to its portfolio all the existing and future of existing and IPs of the company, while also gaining Hutch’s expertise and experience in mobile game development, bringing 100 more people to its team

  • While Hutch Games is undoubtedly a great asset, we still observe a high valuation compared to the precedent transactions in the mobile game sector. MTG states that such multiples “should be seen in the context of continued strong growth going forward and implies an estimated EBITDA 2021 multiple in the low teens”

  • This transaction is a great example of one more successful VC exits in the video game industry with Hutch Games being backed by Initial Capital (Seed in 2014) and Index Venture with Backed VC ($5.5m Series A round in 2017).

  • Hutch generated approximately $56.3m in revenues, $13.3m in EBIT, and $14m in EBITDA during the first nine months of 2020, while the annualized financials are $75.1, EBIT was $17.7m and EBITDA was $18.7

Multiplies With Earn-out Without Earn-out
EV / Revenue’20 5x 3.7x
EV / EBITDA’20 20.1x 14.7x
EV / EBIT’20 21.1x 15.5x

The multiplies are based on annualized financial performance for 2020

🎲 Products

  • Founded in 2011, Hutch Games is one of the leading developers and publishers of F2P mobile racing games, best known for 3 out of top-10 global grossing racing titles: Rebel Racing, F1 Manager, and Top Drives with +300m downloads and 5.4m MAU. The company has 13 live games with Puzzle Heist (match3 with RPG mechanics) in soft-launch stage and 1 in pre-production.

  • The total amount of downloads of all company’s titles is over 252m. The chart below shows, that Hutch’s games have a stable amount of downloads, which several times reached a point of 6m. Though there was a decrease in the last summer, the downloads went up in the winter and stabilized. As of November 2020, the number of downloads was 4.3m, 36% of which came from Rebel Racing

Hutch games

💸 MTG’S Latest Acquisitions

  • In December 2020, MTG has acquired an additional 17% of shares in Germany-based developer and publisher InnoGames for ~$128m (~10x LTM EBITDA), bringing its total stake in the company to 68%. As part of the deal, MTG will cancel its potions for the remaining 32% of the company.

  • In June 2017, the company acquired San Francisco-based free-to-play mobile games developer Kongregate for $55m

  • In May 2017, MTG acquired a 51% stake in Germany-based game developer and publisher InnoGames for an undisclosed sum

    • On December 7, 2020, the company acquired an additional 17% stake for $128.6m

  • In November 2015, Modern Times Group acquired Sweden-based esports events and tournaments organization platform DreamHack for $29.7m

  • In May 2015, the company acquired Germany-based esports platform Turtle Entertainment for $85.8m

🧩MTG Financial Performance

  • During the period Q1—Q3 2020, MTG generated $345.2m of net sales, and $40m of adjusted EBITDA, while during the same period of the last year net sales were $362.5m and adjusted EBITDA was $12.2m

  • In March 2019, MTG Group was split into two companies – Modern Times Group MTG AB and Nordic Entertainment Group AB – by the distribution of all the shares in Nordic Entertainment Group AB, and in April 2019, MTG sold 95% of its Nova Broadcasting Group. During 2017, MTG sold its companies in the Czech Republic, Estonia, Lithuania, and Latvia

SOURCES: MTG, GAMEINDUSTRY
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M&A
Hutch Games
  • Established in 2011

  • Headquarters — London, The United Kingdom

  • Team of 100+ employees

  • Founded by — Sean Turner and Shaun Rutland

  • Mobile games developer and publisher

Modern Times Group
  • Established in 1987

  • Headquarters – Stockholm, Sweden

  • Team of ~1000 employees

  • Founded by David Chance (Chairman) Maria Redin (President and CEO) Lars Torstensson (CFO)

  • Worldwide gaming cooperative with PC, console, and mobile expertise