Thank you for standing by. Welcome to the Aristocrat Proposed Acquisition of NeoGames conference call. All participants are in a listen-only mode. There will be a presentation followed by a Q&A session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Trevor Croker, CEO and Managing Director. Please go ahead.
Good morning, everyone, and welcome. My name is Trevor Croker, Chief Executive Officer and Managing Director of Aristocrat. I'm excited to be here today to discuss Aristocrat's proposed acquisition of 100% of NeoGames. We believe this transaction will be truly transformational to our business and lays the foundation to fulfill our ambition to be a global leader in online real money gaming or RMG. Joining me today are Sally Denby, our Chief Financial Officer, and Mitchell Bowen, CEO of Anaxi and Chief Transformation Officer. Before we begin, please note the usual disclaimer statements on slide two of the presentation materials. I'll now move to today's agenda on slide three. This morning, we'll be providing a summary of the proposed acquisition together with detail on NeoGames' businesses, the strategic rationale for the deal, and a financial overview before we take your questions.
I'd also note that there are additional details in the appendix, which provide extra context on the proposed acquisition. All amounts referred to are Australian dollars, unless otherwise noted. Today's discussion will be focused on the proposed acquisition. We'll not be discussing half-year financial or operating results. Full details of performance for the period ending March 31, 2023 will be presented on Thursday this week as scheduled. In addition to the proposed acquisition, we're also pleased to be announcing an increase of AUD 500 million to our existing on-market share buyback program, bringing the total of this program to AUD 1.5 billion. This is in line with our capital management framework, applying our strong cash flow generation to fund organic growth first, and then to deploy capital via inorganic growth opportunities to accelerate our long-term potential.
Returning surplus cash to shareholders while preserving financial flexibility for the future as an ongoing priority for Aristocrat. We continue to expect the program will be completed by May 2024, and we'll provide a fuller update on capital management with the half-year results on Thursday. Moving now to slide five, which provides a summary of the proposed transaction. Aristocrat has entered into a definitive agreement for the acquisition of 100% of NeoGames at a cash price of $29.50 U.S. per share. For a total acquisition consideration of $1.5 billion and an enterprise value of $1.8 billion. We believe this is a compelling and transformative strategic acquisition.
It will bring together NeoGames and our growing Anaxi business, positioning Aristocrat with global scale and all the required capabilities to deliver our online RMG strategy by further expanding our addressable market opportunities and adding strategic capabilities that will allow us to meet a broader range of customer and player needs and fully implement our growth plans. NeoGames is a leading global content and technology solution provider for the online RMG industry, operating across the iLottery, iGaming, and Online Sports Betting or OSB verticals with a full suite service offering. The proposed transaction represents a multiple of 15x NeoGames FY 2023 consensus, EBITDA, and represents a premium of 104% to NeoGames' three-month VWAP as of May 12th.
We expect the transaction to be accretive to EPSA in the first full year of Aristocrat ownership in fiscal 2025 on a standalone basis. This is before the benefits of various revenue growth opportunities that we expect to unlock through the combination of Aristocrat's market-leading content and long-standing customer and regulatory relationships with NeoGames' industry-leading platform and technology. The proposed transaction is subject to, among other things, approval by at least 66.7% of NeoGames shares entitled to vote and present or represent at the relevant shareholder meetings and certain gaming regulatory, sorry, antitrust and foreign investment approvals. Aristocrat has entered into a support agreement with a number of major NeoGames shareholders to vote in favor of the transaction. These shareholders represent approximately 61% of outstanding capital. We expect the transaction to close during fiscal 2024.
Turning to slide six, I'd like to share how Aristocrat and NeoGames' content and technology capabilities combine to offer a complete solution to operators across online RMG verticals. The dotted boxes highlight NeoGames' capabilities with our existing capabilities in solid outline boxes. Together, Aristocrat and NeoGames will have a presence across the full online RMG value chain, starting with market-leading content across iLottery, iGaming, and OSB. Customers will be able to provide seamless experiences to their players by leveraging NeoGames' end-to-end technology and platform solutions, including RGS aggregation, player account management, and managed services. The combined businesses are highly complementary and will be ideally positioned to address emerging trends and demand by adding new capabilities to meet customer needs over time.
Turning to slide seven. A central feature of this proposed acquisition is the powerful ecosystem that will emerge through the combination of our businesses, underscoring how unique and timely this opportunity is for Aristocrat. By adding our world-leading content and deep customer relationships across our gaming and digital businesses to NeoGames' technology and platforms, we'll create a positive flywheel that will deliver considerable long-term benefits. This will enable us to accelerate content distribution globally, position us as the technology partner of choice with online RMG customers, and ultimately create an additional sustainable growth engine for the group. Turning to slide nine, I'll provide more detail on the proposed acquisition. NeoGames is a B2B provider of innovative platform and content solutions across online RMG verticals. It is an industry-leading global iLottery provider, offering a complete solution across content platform and services and predominantly government customers, primarily in North America and Europe.
NeoGames has a dedicated iLottery studio and 67% of iLottery share in the U.S. through a joint venture with Pollard Banknote Limited. Aspire Core is a leading online RMG technology provider, offering a full-service platform and managed services solution to iGaming and OSB operators globally. This includes a comprehensive and feature-rich Player Account Management platform or PAM. Aspire currently serves over 88 brands and over 30 partners across Europe and North America. Moving now to Pariplay, which is a global leader in iGaming content aggregation and development. It distributes iGaming content through its proprietary aggregation platform, as well as operating in-house content studio Wizard Games and a game development kit, or GDK. It currently serves more than 140 operator customers with over 15,000 third-party games from leading suppliers and over 1,000 brands.
Finally, to BtoBet. This is a complete sportsbook solution for the global OSB industry, including a feature-rich platform and services. These business segments are highly complementary. They operate on a common platform and technology stack, offering a complete solution that will facilitate seamless future integration and expansion in online RMG. Moving to slide 10. NeoGames is a scaled global player with over 200 customers and operates across over 50 regulated jurisdictions. It operates in high-growth segments with a combined TAM of $81 billion, $11 billion for iLottery, and $70 billion across iGaming and OSB verticals. NeoGames holds leading positions in a number of markets and regions as previously set out. These markets are largely fragmented and offer significant opportunity to continue to take share over time. I'll now step through more detail on NeoGames' business units, starting on slide 11.
NeoGames provides both innovative content and solutions to the iLottery market across the globe, with deep capabilities and core competencies that have built up over many years. iLottery is a highly regulated segment with long-term contracts that provide strong and growing recurring revenues. It is also highly complementary to NeoGames' other business segments, as iLottery has proven to be an effective way to enter new markets. iLottery footprints can be leveraged to facilitate expansion into iGaming and OSB segments as regulated jurisdictions open up new forms of online RMG. Turning to slide 12. Aspire Core provides two main offerings, a PAM and managed services for both iGaming and OSB. It is a leading provider in Europe, serving over 30 partners with 88 brands.
Aspire Core also benefits from its deep understanding of B2C, given its roots as a B2C business, which offers a significant. Thank you. We're back. Slide 13 focuses on Pariplay, which operates in 28 regulated jurisdictions where it provides aggregation services to over 1,000 brands. It has access to over 15,000 third-party games from leading suppliers, bringing an impressive catalog of content for operators. It also has a dedicated in-house content studio and GDK, as previously referenced, which provides a turnkey solution enabling third-party developers to rapidly scale on its platform. This is all combined with a suite of unified retention and engagement tools, making Pariplay a partner of choice for customers. Finally, looking at BtoBet on slide 14. BtoBet offers a sportsbook platform linking scalable content and a full suite of managed trading services, including omni-channel capabilities and player engagement tools.
This has supported a rapid growth across Africa, Europe and Latin America, where BtoBet now serves over 50 brands across 20 partners. Moving now to slide 16, I'd like to share more on the strategic and financial rationale for the acquisition. First and foremost, the acquisition of NeoGames will immediately position Aristocrat as a scaled global leader in the large and growing online RMG industry. The acquisition also delivers significant and exciting revenue opportunities as we combine Aristocrat's leading game content and long-term customer and regulatory relationships with NeoGames' technology and platform solutions. Third, the transaction offers significant international growth opportunities for the combined group, particularly to expand in large, growing, and still relatively nascent North American segments, as well as more broadly across Europe and the rest of world markets.
Through NeoGames' leading iLottery business, Aristocrat will partner in a highly regulated, attractive, and complementary adjacency, which will also facilitate further penetration across other online RMG verticals. Aristocrat plans to invest and grow in this important vertical. Finally, in addition to the strength of the underlying business, NeoGames has an experienced and proven management team that will continue with the business going forward, contributing to overall online RMG growth and supported by a strong cultural alignment between our two businesses. I'd like to expand on each of these powerful benefits a bit more across the next five slides, starting with slide 17. The combination of NeoGames and Aristocrat will immediately deliver our ambition to build scale and capability in online RMG and effectively complete our build and buy strategy.
Aristocrat will be positioned to compete in a total addressable market of $81 billion across the iGaming market, iLottery, and OSB value chains. Furthermore, our ability to offer a full suite of services will enhance our ability to become a partner of choice for online RMG customers across segments, distribution channels, and markets globally. Slide 18 highlights the significant revenue growth opportunities we believe this acquisition will offer. For example, we expect to rapidly accelerate the distribution of Aristocrat's leading content via Pariplay's strong aggregation network. We also expect to leverage our existing deep customer relationships to expand the placement of Aspire's core PAM and managed service offering, along with Pariplay's aggregation platform and BtoBet's OSB platform. Being able to offer a complete solution to customers across verticals on a common tech stack provides further advantages, as previously noted.
Meanwhile, we believe our deep regulatory experience and long-term relationships will also accelerate NeoGames' efforts to expand into new jurisdictions. On slide 19, we provide further granularity on international growth opportunities for the combined group. North America represents a large, growing, and still relatively nascent market opportunity, particularly in iGaming. While Europe is a larger and more developed market, North America is expected to quickly catch up in the years ahead as regulation increases across verticals. The ability to leverage existing relationships and offer a complete solution to customers will deliver strategic benefits and enhance our ability to grow in North America. Turning now to slide 20, which focuses on iLottery, a new segment for us. As I previously noted, iLottery is a fast-growing, attractive, complementary vertical, which is highly regulated in nature, and NeoGames has a strong position in key markets, including 67% share in the U.S.
iLottery is often the first online gaming online RMG vertical to be legalized in many markets, NeoGames' established relationships with operators and regulators should facilitate growth in other regulated online RMG verticals as they come online. We believe we can leverage NeoGames' leadership position and innovation in U.S. lottery, in particular to expand iGaming and OSB as more jurisdictions regulate. Turning to slide 21. Key members of NeoGames' proven management team, who have scaled the business successfully over a number of years, have committed to remain with NeoGames under Aristocrat ownership. We're very happy to be working with a team that has track record of developing and scaling complex technology and has deep RMG capabilities. NeoGames' CEO, Moti Malul, will also be among the leaders coming across with the transaction and will be instrumental in furthering Aristocrat's overall online RMG efforts.
We see strong cultural and business alignment across our two companies. Both Aristocrat and NeoGames' customer-first approach and commitment to being a partner of choice has underpinned their successes. Further, both of our businesses have a strong focus on innovation and a people-first culture. NeoGames shares our commitment to sustainability and responsible gameplay, which is central to everything we do. We're excited by the talent and capability that will be joining Aristocrat and look forward to this partnership. I'd now like to turn to NeoGames' financials. NeoGames has been a successful high-growth business. It has delivered a revenue CAGR of 38% and EBITDA CAGR of 34% since 2019 on a pro forma basis, with each of its divisions contributing to this performance.
We'll now provide more on the fiscal 2022 year in a chart, how you should think about the revenue and profit numbers under Aristocrat. Slide 24 provides a reconciliation of NeoGames' public financials to their full year 2022 pro forma numbers in U.S. dollars, the illustrative adjustments that we expect to make under Aristocrat ownership. I'll step you through a few of those important points. Firstly, NeoGames' public numbers in the first column do not include a full year impact of the acquisition of Aspire Global, which was finalized midway through fiscal 2022. The pro forma adjusts for this. Looking ahead, there are three main call-outs on the adjustments to provide consistency between NeoGames' pro forma financials and Aristocrat reporting and accounting treatment.
One, the iLottery joint venture, NeoPollard Interactive, will be reported as an associate interest rather than being proportionally consolidated in revenues as reflected in NeoGames' pro formas. The JV profit will be included in Aristocrat's EBITDA. The second adjustment on the slide is for stock-based compensation expenses, which will be included in our calculation of EBITDA. Thirdly, NeoGames capitalizes certain game development costs expected to be expensed under Aristocrat's accounting policy. All in, you'll note the adjusted pro forma EBITDA of AUD 59.5 million in the final column for FY 2022, which aligns with EBITDA used in other financial slides in the deck. Moving to slide 25. The acquisition will be funded with existing cash resources, resulting in a pro forma net debt-to-EBITDA ratio of 0.7x based on our fiscal 2022 financials.
It should be clear from the slide that the adjusted balance sheet items do not take Aristocrat's first half result fiscal 2023 into account or the additional AUD 500 million on market share buyback that we announced today. Slide 26 provides a consolidated view of the company in Australian dollars, reflecting the fundamental adjustments we've discussed in the previous slides. I outlined up front, we expect NeoGames to be accretive to EPSA during the first full year of ownership, which is expected to be fiscal 2025. It's important to appreciate that this expectation does not factor in any of the revenue opportunities we expect to deliver, which are key rationale behind the deal. Before we conclude, I wanna round out the financial discussion and revisit the strategic revenue opportunities we highlighted earlier. I'm on slide 27.
While we are not quantifying these revenue opportunities today, we thought it was important to provide some specific examples of where they are expected to be delivered across the online RMG value chain. Looking through the value chain, there is an opportunity to bring Aristocrat's high-quality content into Pariplay's global network of over 140 operators, while also leveraging our numerous relationships across over 300 jurisdictions globally to win new contracts with Aspire Core and Pariplay. In particular, we believe we can win new PAM and managed service contracts by providing an integrated end-to-end solution of content, platforms, and services. While we're excited about the immediate opportunities that this transaction provides, we see significant potential to expand into large and growing North American market as it opens up over time.
Overall, we see significant opportunities across iLottery, iGaming, and OSB through this vastly expanded network of content and customers using this combined technology platforms of the enlarged group. In summary, we're extremely excited about the transformational news that we are sharing with you today and the benefits we believe it will deliver for our customers, players, and shareholders for years to come. The proposed combination of Aristocrat and NeoGames will instantaneously create scale leading global business with a full range of capabilities to grow in online RMG and deliver our build and buy strategy. This proposed acquisition brings together Aristocrat's world-class land-based and social gaming content and a long-term customer and regulatory relationships with NeoGames' proven online RMG platform and technology capabilities to forge a true industry leader across the full online RMG vertical.
This is very much aligned with Aristocrat's strategy, investing for long-term growth, and we are energized by the broad range of new opportunities that this will present. We look forward to welcoming NeoGames management team and the talented employees to accompany us on this journey that lies ahead. Thank you with that. Thank you. With that, I'll ask the operator to open the line for questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask a question. The first question comes from Matt Ryan with Barrenjoey. Please go ahead.
Well, thank you. Just had a question on the logic for the acquisition. It's obviously been a while since the Playtech acquisition was terminated. Just curious on, you know, what you saw in NeoGames that perhaps other deals didn't, assuming that you've been looking since then, and whether there was anything, I guess, more recently that sort of got you over the line with Neo?
Yeah. Thanks, Matt. Appreciate the question. You know, we've been, we've been in this market for a number of years now. We've continued to look at the market. We looked at what is the strategic importance for us to entering up into the RMG market, and we've spoken about talking to our customers and talking about how we leverage our content. When we looked at this deal, particularly, you know, NeoGames brings a very good tech stack, so a very solid technology stack that comes with it. It brings a strong ability to fill out in the OSB market and the iLottery and the iGaming market, so it brings a whole suite of offerings.
It's got a proven PAM that is now used in a number of markets in Europe and the ability to then leverage that PAM into the North American market as well. We also felt that the fact that they have consolidated the business, they've got common management across Aspire and Neo, they're a proven management team that have been around the industry for some years. They offer great, if you like, cultural alignment to what Aristocrat is, and also we saw that they have very strong certainty with 61% of the founding shareholders committing to the transaction as well. We've continued to stay in the market. We believe this is a compelling solution. Very impressed by the management team, the product, and the customer relationships, and excited by the opportunity that iLottery provides to Aristocrat as well.
Thank you. That's really helpful. I just wanna clarify, I think in your prepared remarks, you might have said something about that the deal sort of completes the sort of buy and build strategy.
Right. Yeah
In regards to RMG, and obviously you've announced a new buyback on a go-forward basis. I guess just thinking through your capital allocation framework, are we sort of to suggest now that sort of RMG is sort of complete, in your words? Perhaps, you know, M&A might fit outside of that, but we might also be looking at, you know, I guess, a period of capital returns rather than M&A. Just any color on that sort of thing would be really helpful.
Yeah. I might make a couple of comments and then hand to Sally. I think the key thing, first of all, this does build out our build and buy. The build strategy is going well, and we'll talk to you about that later in the week. I'm very happy with what we're learning and how we're growing that business going forward. This does give us a complete solution like we said. It gives us exposure in Europe, and it gives us access to North America, so we can scale our content into Europe and also into North America. If you think about what does this mean for the group, you know, we've continued to focus on investing in the organic business as our number one priority.
We continue to spend UA, I'm sorry, D&D AUD to drive the best content, technology, and hardware into the business every year. We use UA to accelerate our growth, and we apply capital to our gaming operations business. That remains our number one priority. Number two priority is to use the capacity of the organization to accelerate our inorganic growth, and that's what this deal does. It accelerates the inorganic growth for the longer-term shareholders and for the business as a whole. At the same time, with the strong cash flow generation, we're returning cash back to our shareholders. We continue to see that as a viable solution at this point in time. We've now committed to AUD 1.5 billion of capital return.
At the same time, having the confidence to invest in the future of the business, it doesn't constrain our ability to consider further M&A for the parts of the business when and if they become strategically important to our business.
Thanks, Trevor.
I don't know, Sally, if you wanted to add.
No, I haven't really. I haven't got anything to add to that, Trev.
Your next question comes from Rohan Sundram with MST Financial. Please go ahead.
Hi, Trevor and team. Just a couple from me. Trevor, can you just enlighten us on how the acquisition originated and just how confident are you of deal completion? I take on board your comments around the shareholder, the undertakings, and just which regulator approvals are you after, and how confident are you on those?
I'll talk to the confidence levels, Rohan, then Mitchell might talk to some of the more technical aspects of it. We've been engaging this segment for years. As you may recall, we've talked to you a number of times about this, we've been continuing monitoring the markets. You know, this target actually changed its structure last year, which made it a more possible and probable conclusion. We've been continuing to monitor. We've been engaged with this target for over 12 months and been engaging with them on a lot of bases, about understanding them as people, understanding their business, understanding their markets, understanding their technology, and really getting to the core of what drives their organization as a whole.
From that point of view, you know, we satisfied ourselves well in the process, then we started to move into more of the completion and the deal structure and what were the opportunities and what were the synergy growth opportunities for us as partners going forward. If we get to some of the technical side of it, I think we have 61% of the shareholding capital committed to this transaction now. We believe in that. We have absolute confidence in their ability to deliver that proposal to us, noting we only need 66.7% to actually move the transaction forward through the regulatory approval processes. Mitchell, you may just wanna talk a little bit about the regulatory piece and just your engagement with the teams as well.
Yeah. Excuse me. Thanks, Trevor. I think the only adds I would have is, I think as you're aware, Rohan, we spent a fair bit of time looking at the market, understanding where we should or shouldn't play, understanding customer feedback, and then making an assessment on what makes logical sense for us to enter. All of these adjacencies make logical sense for us to enter. As Trevor talked about, the NeoGames themselves have the baseline technology and building blocks for us to now go and execute against a lot of the revenue synergies that like we've identified through the deck. As we've talked about previously, as markets like North America continue to regulate, as our customers continue to get more and more interested in the digital regulated space, that's why this transaction makes sense for us today.
I might just draw a line on that, too, Rohan, just in case. The acquisition is not pending on markets openings. This is all about us taking share in the markets we operate in, scaling in the markets that NeoGames operate in. It's not dependent on markets opening for us to have the confidence on the future value of this acquisition.
Thanks, Trevor and Mitchell. Just to confirm, sorry if this is in the presentation deck, is NeoGames only in regulated markets, and is NeoGames in the major U.S. iGaming markets?
I can take that one, Rohan. Yes, NeoGames are in the major regulated U.S. iGaming markets, and through Pariplay, and Aspire Global, and obviously the Neo Lottery. What we're looking through from expecting the markets, over through Europe in transitional sections, but it's really immaterial in the grand scheme of things.
Okay. Thanks, Mitch and Trevor. Cheers.
Thanks, Rohan.
Your next question comes from Andre Fromyhr with UBS. Please go ahead.
Thank you. Good morning. I guess, Trevor, you've been pretty open in previous conversations around the need to build PAM capabilities or more specifically to buy PAM capabilities. Is that sort of the underlying motivation around this? I guess as an extension to that question, do you have plans to grow the lottery or the sports betting businesses further, or is it mainly about getting the PAM in place of your existing Anaxi offering?
Yeah. Thanks, Andre. First of all, this business comes with a very, very strong PAM. If you go back to the core fundamentals of the business, it comes with very, very strong PAM, and we get a PAM that's proven and it's scaled and operates in iLottery, operates in sports and operates in iGaming. We get a very good PAM product, and we're very happy with the PAM, and that was part of one of the attractive offers as to why this target was there. Your question about do we intend to grow iLottery and grow sports, that's all we do. We don't buy business to manage them.
We buy businesses to grow them, we see a great opportunity to invest to grow lottery. We see that sports is an important offering for our customers when you start to think about the total RMG solution. We'll continue to work with BtoBet and also the NeoGames businesses. We intend to grow all of those as we increase the PAM penetration through our relationships and regulatory positions in North America, leverage their PAM and aggregation content outside North America, invest behind securing more iLottery contracts, and also offering sports across the whole portfolio for our customers.
Thanks. Just more on the process to play out. The timeline you flagged as sometime during FY 2024. How critical a period of time do you think that is for the industry? And do you have any sort of agreements with Neo about how they continue with their strategy or how you might even work together in the meantime, just to make sure that you don't miss out on opportunities as the industry changes rapidly?
First of all, a couple steps here. There's obviously the shareholder approval step, which is really determined by Neo, that process is going to take a short period of time. The larger amount of time is actually the standard regulatory process. Whether it was this asset or any other asset would be the regulatory approvals that are required under gaming licenses, which is predominantly the long pole in the tent from a timing point of view. As it goes to existing markets, you know, they already have a pipeline of activity to continue to run their business and drive in existing markets. We obviously would be keen to work with them once we are in a position to work with them post-close.
I don't think that we're missing out on opportunity in North America if you look at what's happening in the iGaming markets. You know, we'll talk to you about the Aristocrat penetration in the build side of iGaming. They're also making penetration into iGaming and providing solutions through Pariplay already. The pace of market opening is not seeing us miss out on opportunity, and we believe that over the closed period, that there'll be more interest around how Aristocrat and NeoGames will provide a full suite solution to our customers in North America.
Okay. Just one more, if you don't mind. You previously described the layers of the iGaming market with sort of aggregation and the PAM being quite separate roles. Can you just confirm or provide a bit more detail as to how, as a PAM provider, you don't need to have the aggregation as well, but you can be sort of, you can work in hand with other aggregation technology if that's what the operator proceeds with?
Yeah, sure. I'll hand to Mitchell, who can just give you how it all works together.
I think the question, if I interpret the question, you do not need to have the same PAM with the same aggregator with the same content all connected. The PAM is open. It can connect it to a range of RGSs or Remote Game Servers and Aggregators. The Pariplay aggregator can connect to multiple different PAMs. Does not have to be the Aspire or Neo PAM. The way the value chain works, and we've talked about previously, content aggregation, platform and services, and then operations. What this does is it brings us all the way up in the value chain to the platform, and obviously falls short of operations, which was never our intention.
What it does is it gives us flexibility or an operator flexibility to have a full tech stack, end to end, or we can use parts of that tech stack across different customer bases to add value where appropriate.
Perfect. Thanks.
The next question comes from David Fabris with Macquarie. Please go ahead.
Oh, hi, Trevor and team. Thanks for taking my questions. Look, I'm curious on how you think about scaling into other RMG verticals like live dealer and iTables. I mean, is this something that will happen near term? Do you need to wait for NeoGames to settle? Is this something you can build, or is this another area where you need to acquire this, these verticals?
Yeah. Thanks, David. Appreciate the question. I go back to the point that we believe this completes the solution from our perspective. There are those other verticals that over time, likely we consider a bolt-on in other parts of the business or an adjacency, we would look at those. What this gives us is it gives us a great iGaming platform, gives us a strong iLottery position, and it gives us sports. All of those we believe we can scale on the PAM that we're buying through this. Those other adjacencies are there for us to enter at points in time, but for this point in time, our focus is on integrating this business, scaling this business using the strength of our customer relationships, our regulatory relationships, our content with the technology behind Neo and their capabilities.
That's the focus. We see great opportunity over the next few years to do that. At some point in time, if live dealer is required or poker, et cetera, then we will consider those based on customer needs, but this gives us a platform to be able to provide that to them.
Got it. I know this question already been asked, if we're thinking about M&A here, I mean, could we still see sort of sizable studio deals for Pixel United or Land Base, or do you need to take a break now to integrate NeoGames?
Look, I think to be honest with you, David, we've made a big commitment here about the future growth of the company. Like we said, this is about the medium-term growth of the company. We have the capacity. You can see the strength of the balance sheet of Aristocrat. You can see our commitment to ShareMoney with our shareholders, but also to continue to invest, to drive both the short and long-term delivery. It doesn't preclude us from doing those deals. We will still focus on talent deals, but I don't think you need to do big deals to do talent deals when you think about what we're building out. It will be about our strategic allocation of capital to the right things that actually accelerate our strategy, not just what's on the market at a good price.
No, that makes sense. Just, sorry, one last question. Just with NeoGames, can you clarify whether they bring game development talent or it's more third-party content?
Yeah, sure. I'll hand to Mitchell for you on that one, David.
Yeah, David. They have two content studios, one within the NeoGames, our lottery business, and one in the Pariplay business that are producing content for those respective verticals. The Pariplay aggregation program they have in place, and their content creation tools like GDKs are available for all our emerging studios to develop on that wanna gain distribution through that platform.
Got it. That's helpful. All, that's all for me. Thank you.
Thanks, David.
The next question comes from Adrian Lemme with Citi. Please go ahead.
Hi, Trevor and team. First question was just understanding the strong growth prospects for iLottery that's been mentioned there, 26% CAGR growth. Is that new markets opening up or can you just talk to that, please?
Do you wanna just put some context around that?
Yeah, I think that's historical.
Yeah. The context in that document is historical. The way forward we look at it is in a couple of buckets. Obviously, combining as we've talked about in the presentation, combining Aristocrat content through the iLottery channel. Obviously as new markets and new deals win and then new innovation through functionality that comes in from player engagement, those sorts of things, is how we plan to grow that iLottery segment in partnership with Neo.
Right. Thanks. Yeah, no, I was just reading it off the slide 20% to 22% to 27% forecast CAGR. Then just the second question, just trying to understand what kind of management turnover has played out through NeoGames business because they've obviously had a series of acquisitions where they've bought, you know, Aspire and Pariplay and BtoBet or whatever over time. I understand that the top three people have committed, you know, signed letters to intent. Can you talk about how stable that management has been at the lower levels, please, and the intention of retaining those people?
I'll just make some broad comments, Adrian. Then Mitchell can make some more context. First of all, that's a very seasoned and cohesive management team that have been working together and working with the founders of the business. These are a tight group of people that are operating and investing in NeoGames for a number of years. Very strong and tight relationship from that perspective. We have commitments with a broader group of people that we believe are important to the future of the combined organization that are going to come with the transaction as well.
We feel very comfortable that they are a great team that fit well with our culture and that are going to be really accretive as far as teaching us and helping us understand this segment, but also continuing to leverage their growth through the segment as well. Mitch, you might just give some context on some of the people in depth that you've in turnover.
I think the only thing I would add is I think everyone's got to remember that these businesses used to be together. They've known each other for quite a while. They've split up in order to grow in their independent channels, and they've recently come back together. The management team have got years and years of experience working together. Culturally, they share very similar values to what we do within Aristocrat. Looking forward, in terms of your specific note around attrition, they're in growth mode, and they've been in growth mode for quite a while, as we've talked about and will continue to be. That business are very well aligned to what they need to do going forward and have worked together for quite a few years.
Thanks very much for that background.
Thanks, Adrian.
The next question comes from Simon Thackray with Jefferies. Please go ahead.
Hi, Simon. We can hear you.
Sorry. My headset's decided to break. Sorry, guys. Can you hear me now?
Yes.
Thanks, Mitch. Thanks, Trevor. Just on the management team, you've indicated they've, there are commitment letters or commitments from the management team coming across. Can you give us a sense of how long the commitment is?
No. We won't disclose that, Simon. It's between us and the team. They are excited by the opportunity. They're excited by the cultural alignment. They're excited by the, if you like, the growth profile that Aristocrat is, and we're excited by their capability and technical skills.
Right. Okay. Fair enough. Pardon me, just, Mitch, appreciating the color on the technology and then the brand revenues, or the product stack revenues. With the geographical coverage that Neo has, can you just give us a sense of where the revenue's coming by geography, just as a starting point?
Look, I think if you, if you look at the business, obviously the iLottery part of the business is a significant part of it with Aspire Core, Pariplay, and BtoBet in growth mode. BtoBet, as we've talked about, is predominantly Africa and emerging into Europe and Latin America. Aspire as a PAM business is predominantly Europe and emerging into North America. Pariplay is very much a global aggregation platform across North America and Europe as we go forward. The growth profile is global, but enables us a platform across all regions that we choose to participate in going forward.
Okay, that's super helpful. Trevor, just one sort of, 10,000 foot question for you now. Just so the aspiration in Real Money Gaming, how do you ultimately think about the relative contributions to each of the, let's call it land, social, and RMG? How will that look in, you know, a few years time to you?
I think, Simon, in a few years time, this is going to be the large part of the growth engine. We've got a very strong growth engine in gaming, which we've continued to scale and take share, and we see that continuing. We see the Pixel business or the mobile games business a little bit more challenged at the moment, but we also believe in it longer term and still see that having growth. We see growth in both those core businesses. This, you know, a market TAM of $81 billion U.S., that's only growing. We see a great opportunity to have that, and we'd expect to see it as a strong growth engine for a number of years out.
Okay, that's great. Thanks, gents.
Thank you.
The next question comes from Justin Barratt of CLSA. Please go ahead.
Hi, guys. Thanks very much for your time today. Maybe just as a first question, I was just curious to understand, obviously moving further into other adjacencies, does this, I guess, change your overall or overarching strategy for Aristocrat in any way, shape, or form?
No, it actually complements our strategy, to be honest with you, Justin. We think about our business as a content technology and distribution business. If you look at the way we've expanded in our gaming business, we moved from, you know, a core gaming business into Class II. We've moved from that into social casino, and then we've moved into other social genres. We see this just as another adjacency, and it's a logical adjacency for our content, where we know that our content resonates with players, and it's not another opportunity to distribute our content another, into another adjacency. The other part is our customers are seeking this. Our customers are actually looking for our content in the online environment, for their purposes.
We see that this is actually just another, it's a most logical extension of our business from a content point of view into a new distribution channel. What it gives us is it gives us technology as an organization for things like GDKs and builds out the overall strategy for the group. I see it as a very logical and cohesive next step and an exciting accelerator of the growth of Aristocrat into the future.
Fantastic. Then just another one. I was just wondering if you're willing to share the funding costs assumed in your EPS accretion calculation and whether there are any at all synergies on the cost side that are assumed in that EPSA accretion commentary. I know, Trevor, you mentioned standalone EPSA accreted, but I just wanted to understand exactly what you meant by standalone.
Yeah, I'll hand to Sally, who will give you that detail. I guess my overriding comment is we buy businesses to grow. Our objective here is to drive revenue synergies. That's what we're focusing on.
Just to add to that, we're not sharing anything further. We've been clear that our assumptions are largely driven around the revenue synergies that are not included in the numbers.
Fantastic. Thank you.
Your next question comes from Darshana Nair with Goldman Sachs. Please go ahead.
Hi, team. Can you hear me?
Yes, we can. Thank you.
Yeah, hi. Now that you have access to a broader suite of iLottery, OSB, iGaming, et cetera, can you give us a bit of about what's ALL's priorities in the RMG space, both in terms of verticals as well as regions will be helpful. Thank you.
We have a build and buy strategy, and we're continuing to enter the North American market like we, like we've committed, and we've shared that with you. I think in the presentation, we've talked about the opportunity of scaling the Pariplay business in North America, also adding to the Aspire business. Sorry, the Aspire business and then also leveraging iLottery as new iLotteries come on. I think we've been sort of transparent around the fact that we see adding our content into their Pariplay aggregation platform, leveraging Aristocrat's operational relationships to expand Aspire Core and Pariplay, and BtoBet's customer base, you know, a full suite of service solutions as well, to complement the RMG market as a whole. I think that's where we're focused on.
It does give this where we have been talking. It gives us an existing European business and the ability to accelerate our entry into North America with a full suite RMG offering.
Okay, got it. Also in terms of the PAM, they you did mention that Aspire was largely European at this point. Can you give us a sense of how long it might take to actually establish this in the U.S. business? Also, what's a just to give us a sense of what's a fair share of ticket clip of GGR that we can think about if we, if you go into a full PAM service? Thanks.
Yeah, we won't give you the ship shares and stick the round numbers for you. Mitchell might just talk to some of the how piece.
I think Darshana, the, Aspire are well advanced on their regulatory process in the U.S. Already generating revenue out of Ontario, and are pending licenses in a number of U.S. jurisdictions. Obviously, Pariplay is part of that business, are licensed in five states in North America, so they're well advanced. It shouldn't take us too long to start executing against their business once we upon full ownership.
Okay, thank you.
Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Rohan Gallagher with Jarden Group. Please go ahead.
We can't hear you, Rohan, if you're talking.
Trevor, can you hear me?
Can now. Thank you. Good to talk to you.
Hey. How are you, Trevor? Hi. Hi, Mitch. Good morning, everybody. A lot of questions that have been previously asked, apologies, if my line dropped out earlier. Mitch, could you just clarify your exposure to gray markets? Can you confirm with NeoGames, is it exclusively B2B or is there B2C also in the portfolio? Thank you.
I think the NeoGames business is obviously focused on regulated jurisdictions. It doesn't operate in markets like Asia, and hence we don't have the same issues as we faced previously. Any changes that we'd make to their operational jurisdictions are expected to be immaterial, Rohan, on that side. Second part of your question, refresh me.
The B2C.
Oh, yeah, sorry.
B2B, B2C. Yeah.
Yeah. Aspire does have a, what they call a white label business, through Europe, which is, effectively they hold the operating license and support the overall customer to operate their business going forward. Of that model will be a traditional B2B model in the U.S. It won't involve any form of operation. Basically their European business, they do a lot of things other than things like marketing and UA and things. That's left to the operator. In the U.S., it'll be a traditional B2B software licensing agreement.
Awesome. Thank you. Yeah.
Thank you.
Thanks, Rohan.
Your next question comes from Sriharsh Singh with Bank of America. Please go ahead.
Hi there. Two questions from my side. Can you talk about how you arrived at the acquisition price? As in the 15x multiple looks a bit high compared to public comps or even when I look at what you bid initially for Playtech. Is the 100% premium to share price, do you think is that the most efficient way of acquiring PAM in your view?
Yeah. Thanks, Sriharsh. I appreciate the question. First of all, we focus on the fundamental value and then the potential of this asset as part of Aristocrat, and that's the way that we set the valuation from our perspective. You know, we undertook a very comprehensive due diligence around all the things that we felt were important, and that has taken us over a year to do. As we've spoken about a few times on the call, we see significant value creation from combining our content, our long-term relationships, their technology, and their solutions going forward. You know, other benefits we saw is it does fill out the RMG strategy in terms of iLottery, iGaming, OSB. It gives us a market exposure to Europe, rest of world, and a technology PAM integration.
Your question about how do you value the PAM, we value the PAM, but we get access to markets, we get access to verticals, and we get a very good management team is, there's reduced integration risk and transaction costs and time to actually to do this deal as a consequence of the strong leadership team. As I said earlier, we've got 61% of the shareholders committed to it. We feel that the fundamental value is there and that we know that this is worth it's very good value to Aristocrat into the future.
Understood. Thanks for the comments. The second question is, could you talk a little bit about the risks related to NeoGames' core business, such as in-house tech migration that has been a common theme for B2C operators? If I remember reading somewhere, I think Caesars has a contract with NeoGames where they can terminate the Aspire Core contract for GBP 15 million. Regulatory risks in Europe and in-house tech migration, do you see that playing out or do you think you're sufficiently covered?
Look, I think realistically, first of all, you're getting a high-quality tech platform. You know, it's written in modern code, and it's well-architecture, and it's good. There's no tech debt. I think Mitchell referenced earlier. It's a very strong tech code from that perspective. I think when you get to regulated markets, and Mitchell, if you wanna lay in here, please feel free. If you get to regulated markets, this is an industry that is regulating over time, and it's important that our strengths as a highly regulated company is how do you work in regulated markets to continue to actually be a market leader, and we feel confident we're able to do that. As far as other -
I think, to your, to your second point around insourcing of technology, you know, what NeoGames provides is a full suite tech solution that can enable an operator to avoid the high costs of insourcing technology. There, there are obviously operators that have insourced their technology and will continue to do that, but that does come with significant cost and significant knowledge that is not gonna be the model for every customer going forward. If you think about the iLottery vertical in particular, the insourcing tech is an, is a non-issue, given the government contract sides, so that remains very positive for this. When you're talking about the iGaming, OSB side of things in particular, there are only a small number of operators that can insource their technology at a scaled level.
What this solution does provide is an end-to-end solution that an operator can choose and be flexible on different features and functionalities within the tech stack to enable them to operate an online regulated business.
Understood. That's good. Thank you.
Thank you.
There are no further questions at this time. I'll now hand back to Mr. Croker for closing remarks.
Thank you, all, for joining us today. You know, we're extremely excited about the transformational news that we've shared with you today, and we'll keep you updated as the proposed acquisition moves forward. We also look forward to speaking to you again later this week to discuss our first half results, and thank you for your ongoing interest in Aristocrat.