The acquisition is the first by Fairground Gaming since admission to AIM in October 2005, and 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.
The Spin Palace Group is licensed in the Mohawk Territory of Kahnawake and operates Spin Palace Casino, Ruby Fortune Casino, Piggs Casino and Poker333 on software supplied by Microgaming.
The maximum consideration payable to the vendor, Roundit Limited, under the terms of the agreement is $66 million and is to be satisfied as follows:
•Initial consideration of approximately $46m, equating to 8 times the Spin Palace Group\’s audited EBITDA for the year ended 31 December 2005, consisting of $10m cash payment from existing Fairground Gaming resources with the remainder being satisfied through the issue of ordinary shares and warrants over ordinary shares in Fairground Gaming;
•Further earnout consideration payable of up to S$20m, dependent upon the EBITDA of The Spin Palace Group for the year to 31 December 2006
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 $19.2 million in 2004 rising to $29.9 million in 2005. In March 2006, the Spin Palace Group had 9,300 active casino players (2004:3,380) and 2,100 active poker player (2004:500).
Approximately 97% of the Net Win revenue in 2005 was generated through the online casino activities, which includes slots, roulette, baccarat and blackjack. Net Win revenues from poker accounted for the remainder. The latest management accounts indicate an unaudited Net Win of $9.7 million in Q1 2006, up respectively 24% on Q4 2005 and 33% on Q1 2005.
“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,” said Evan Hoff, Chief Executive of Fairground Gaming.
Elsewhere, Las Vegas From Home.com announced Year End 2005, Fourth Quarter 2005 and First Quarter 2006 results. The gaming software developer reported during the first quarter 2006 a 79% year over year revenue growth up to $3.7m and a profit of $0.3m.
For the full year 2005, revenues were $11.7m, representing a growth of 490% year over year as a result of increased usage of the company\’s gaming software. Net income for the year ended was $1m compared to a net loss of $5.3m in 2004.
LVFH is in the process of establishing an office in Costa Rica which is expected to generate further licensing and other business opportunities. The company\’s two main brands, Tiger Gaming and Action Poker, are preparing to launch highly visible marketing campaigns related to this year\’s World Series of Poker. In 2006, LVFH expects to achieve revenues of up to $20 million from its current poker offering, with a new stream of revenues expected to be generated with the launching of a new Asian Software platform.
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