Good morning everyone, and welcome to this conference call regarding MTG's sale of ESL Gaming. My name is Lars Torstensson, and together with me today, I have our Chief Executive Officer, Maria Redin, and our Executive Vice President Esports and Gaming, Arnd Benninghoff. But with that said, I would like to hand over immediately to Maria Redin to go through this great deal. Over to you, Maria.
Thank you, Lars, and good morning everyone. We are of course extremely excited to walk you through yesterday's announced transaction and then also briefly talk to you about the next MTG, the pure play gaming company. Let's start with the high level of the transaction, which really marks a milestone from MTG, and it has created first Esports unicorn. We've been for quite some time been outspoken about our belief in B2C, the relevance of really building an end-to-end competitive gaming platform, and that we are exploring both organic and inorganic opportunities to achieve this. We are of course therefore excited and proud that we're enabling the merger between ESL and FACEIT, and also the subsequent sale to the Savvy Gaming Group. It is a transformative transaction for the industry, it's a highly value creative transaction for our shareholders, and it is an accelerator for our gaming strategy.
For the community, this unlocks new opportunities as we are creating leading end-to-end competitive gaming platform. It's gonna be backed by Savvy Gaming, who's a firm believer in the strategy and the industry as a whole, which was extremely important for us as we decided upon this transaction. For MTG and our shareholders, it does crystallize the value of our Esports assets. It provides them a 2.5 x return on the investment we've been a proud owner for over seven years, and the return on the investment is based on an EBITDA just over $1 billion. Of the net proceeds, we'll distribute at least 40% back to our shareholders, while the remaining funds will be used to accelerate our buy build strategy in the gaming vertical.
Before we go through the specifics of the deal, let me just walk you through the journey of our ownership of ESL and what's been leading up to today's announcement. If you look at the slides, we are now seven years into our ownership of ESL and DreamHack. We invested already back in 2015, which was then way before the hype, and that means that we were also early in identifying the relevance and the importance of Esports as a means of entertainment and engagement. This has provided us access to the leading asset at that point in time when we invested, and we have ever since been working closely and supported the management to really build a company that is today the global leading independent Esports company.
If you look at this journey, what we have together with the management team really assured is a global footprint through our geo roll-ups across the world, commercialization through establishing of new leagues, teams, and audience measurement structure to make sure we can properly monetize the eyeballs that we reach. Onboarding of tier one global brand partners, which means partners outside also the endemic brands, which is bringing Esports mainstream. Last but not least, something we've spoken quite a lot about, the product extension, which means that including broader publishing partnership, moving into mobile leagues, which we now rolled out on a global basis during this year, and acceleration of B2C.
If you take all of this combined and also bring it together with the learnings we've had from the ongoing pandemic, all this has really led up into our belief in the relevance and the importance of an end-to-end integrated competitive gaming platform, which also then led us to the merger discussions to create the ESL FACEIT Group and subsequent sale to Savvy. If we're now looking at the next slide, so the journey we've had with ESL, what has it actually meant when you look at the core metrics? If you look at this chart, on all accounts, ESL has really had a tremendous journey. As always, the most important indicators, hours watched and unique viewers, have increased threefold and double respectively over this journey, which really shows the massive interest and engagement that we have around our products.
This interest has of course been a key driver of growth of our number of partnerships, which in their turn has of course been a key driver of our revenue growth. Today, we have closed 100 partnerships, and that is an amazing journey from when we started with around 30. If you look at the revenues, despite being negatively impacted by COVID, which everyone is aware of, we still see a threefold growth here. Moving to the next slide then, I mean of course these standalone ESL numbers are really great, but what has made the numbers even more interesting is of course when you look at them in the context of the merger and what this combination enables, where you put together the leading Esports and competitive gaming company, which will have a total reach together of over 225 million fans.
As I said before, we have for quite some time been outspoken about our belief in B2C and the relevance of building an end-to-end competitive gaming platform, and that we have been exploring strategic opportunities. On the inorganic side, we have known FACEIT for quite some time, and as we discussed with them, as with some other partners, it became clear that in the discussions with FACEIT, we shared both the vision of industry consolidation and also really the desire to create and build the number one end-to-end competitive gaming platform, and that's why they became our preferred partner. Together, the ESL and FACEIT Group will become the destination for gamers, audiences, and partners looking to reach the digital generation. With a combined reach and the game integrations, they will provide both increased relevance but also engagement and entertainment to all the stakeholders in the industry.
If I look forward, part of being a good owner is to know when I can add value and support, but also when it's time to divest. We are a huge believer in the ESL and FACEIT strategy, but we're also realistic that we may not be able to enable this merger purely on our own. We now look at the sale to Savvy Gaming Group. We are really enabling the merger, and we are so happy that we also identify a buyer who is long-term committed to the strategy and the industry. As I said before, this is a key driver for us. If you look at the next part, we're also delivering substantial share of the return as a part of this. We've been a proud owner for seven years, now we're seeing return.
Of the return, this will partially be paid back to our shareholders, and it will partially be reinvested to drive accelerated growth in our gaming vertical. If we then turn our eyes forward, the sale will transform MTG into pure play gaming company, which means a clear focus and a clear equity story. We're really happy that we're strengthening our balance sheet with the proceeds of the sale, which means that while we're excited about the portfolio and the position we built now within the last 12 months, this transaction is also the catalyst to accelerate our buy and build strategy in a market that is consolidating. With that high-level overview, I will then hand over to Lars, who will walk you through the details of the transaction.
Thanks, Maria. First I would like to echo Maria's excitement over the deal. We are not just creating the first unicorn of Esports, but also releasing significant shareholder value. Let me go through some of the basics of the transaction. First of all, we are selling ESL Gaming to Savvy Gaming Group for a price of SEK 1.05 billion in a 100% cash transaction. As many of you on the conference call are aware, MTG owns 91.46% of ESL Gaming, and that means that the proceeds to MTG amounts to SEK 960 million of the total enterprise value. That equals almost 2.5x of what we have invested in ESL Gaming.
Net proceeds for us, following the fees and advisory costs that we will be paying will amount to approximately SEK 875 million. It's important to notice, of course, that the sale of the shares in the Esports vertical is exempted from tax. We are expecting that the transaction will be able to close in Q2 2022, but the transaction is also gonna be reviewed from a regulatory perspective. All in all, significant shareholder value has been created today, and that leads me to what we're gonna do with all the cash that we will receive. Across 2021, we have been investing significantly into our buy and build strategy, creating a much more diversified gaming vertical.
We have, during that period of time, had great support from our shareholders in doing this. Now as we are exiting our Esports vertical, we have the possibility of returning cash to our shareholders. As a result of that, our intention is to distribute at least 40% of the net proceeds received. Just to be clear, our guiding principle for deciding on how we will distribute these proceeds to shareholders is that it should be fair and tax efficient. Provided that the transaction now closes in a timely manner, MTG's board of directors intends to propose a structure for the return of the funds to MTG's shareholders already in connection with our annual general meeting. That will be on the 24th of May 2022.
After the anticipated distribution, MTG will have a net cash position, including full earn-out obligations towards its acquired gaming companies. By all means, we will have a very strong financial position to accelerate our growth strategy as a pure play gaming company. That provides me with a very nice segue over to Arnd, who's gonna go through our strategy as a pure play gaming company. Over to you, Arnd.
Thank you, Lars. Good morning, everyone. Please let me introduce you to the new MTG, which is a pure play gaming company. We are building a high-quality gaming group around evergreen franchises and highly committed visionary gaming entrepreneurs. We already set out back in 2015, pursuing a buy and build strategy where we laid the foundation by acquiring Kongregate and InnoGames. Now over the last 12 months, we've added three complementary gaming studios with Ninja Kiwi, Hutch, and PlaySimple. That's the foundation of our nicely diversified gaming portfolio, spanning from casual to mid-core mobile first businesses. We reach more than 30 million monthly active players and have already diversified our revenue streams at 75% in IAP revenues and 25% ad revenues.
The environment we've created attracts long-term committed entrepreneurs based on a clear operating model where we support the entrepreneurs, help them to accelerate their business through centers of excellence across the games critical services from the analytics to live ops, marketing UA, and even blockchain as a center of excellence. This gives the perfect home in a family model to these entrepreneurs. Together they share the knowledge, they benefit from these central services, and drive the growth in their respective businesses. We will continue to drive the consolidation of the gaming market, where we can find an endless number of independent studios in a fragmented market. Through the further acquisitions, we will leverage the operational synergies and reduce the risk of the IPs of game launches. Based on our acceleration platform, we can find many more attractive companies. We have built up a strong M&A funnel already.
After screening more than 3,000 companies over the last years, we engaged in discussions with more than 30 targets which will fit our gaming investment strategy. The ultimate strategic goal is to create a well-diversified balanced portfolio in terms of revenue streams, in terms of life cycle of the games and genres. As you can see here, we've already established a great portfolio of evergreen franchises from the Tower Defense, Bloons IP, all the way to the surgery games for Inno Games, Forge of Empires. Having said that, I'm happy to hand over to Maria, who will walk you through the stellar performance of our existing games portfolio.
Thank you, Arnd. As I walk you through our ambition in gaming, which is really exciting now as we're building a stronger balance sheet to Arnd's point, that we can really accelerate our ambition, I think it's also important to see our starting position. There has been a lot of changes to Arnd's point the last 12 months, and we're really excited about where we stand today. Most important, we feel that we're not only a good owner of the output, but we're also a good finder and architect of a new type of gaming group. When we look at the combined portfolio, we are at the Q3 year-to-date reporting revenues of SEK 3.5 billion.
The exciting part is that we also outgrow the market with our growth rate at 12% versus market expectations of around 4%, while keeping our margins intact of around 31%. It is clear that the growth is coming from our newly acquired businesses. We feel very happy, it goes without saying, of their performance, and they are delivering in total of 45% year-over-year growth for the first three quarters of the year. This means that the newly acquired assets amount to roughly 50% of both our sales and EBITDA. Worth noting as well, based on the EBITDA the last 12 months coming up to Q3, the implied EBITDA multiple paid on these assets is 9.5x, showing that we're not only good at sourcing great assets, which Arnd also showed, but also paying fair valuations.
That gives me comfort as we now move forward with our gaming strategy and becoming a pure play gaming company. Moving to the last page, and to wrap it up before taking your questions. I cannot say it enough. I think it's fair to say that we are super excited to announce this transaction. It is the first unicorn in Esports, and I think we're enabling a merger that really will transform the industry and provide all stakeholders with a more relevant partner. Through the transaction, which really renders 2.5x return on the investment, we will realize substantial shareholder value creation. This will, of course, partially be returned to our shareholders, but this will also be used then to accelerate our ambitions with the gaming side and provide us with a much more forward-leaning position within the industry consolidation.
Again, I think the way we look at it is, it is the beginning of a new era. Based on that, we're now ready to take your questions.
Thank you. As a reminder to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound hash key. Your first question today comes from the line of Oscar Erixon from Carnegie. Please go ahead, your line is open.
Good morning, guys. This is Oscar from Carnegie. First of all, congratulations on a very, very exciting deal. A few questions from me. First of all, on the regulatory side, what's your view on the approvals needed here? Is there any risk as you see it that this does not go through?
Yeah. Hi, Oscar, good morning, and thank you. On the regulatory side, I think as we set out in the press release, there are a few countries where we need to do filings. The way we look at it in our assessment is, closing will take place during Q2, and we feel very comfortable about that.
Great. After the distribution to shareholders, do you have any sort of indications on the net debt, net cash position post this deal? Related to that, on the M&A pipeline, you showed a slide there, but are you having very active discussions now, sort of ready to execute on in the first half of the year? Just a few comments there would be interesting. Thank you.
Yeah. No, we don't wanna give the precise sort of net cash position post the dividend distribution. The way where we look at it to understand sort of how much to keep, because we do have, and Arnd Benninghoff will talk to you a little bit more about that afterwards, a very interesting M&A pipeline. We also feel that we want to give back to shareholders, and that's the right way to do it. We try to strike the balance in between, enabling, of course, a strong position going into consolidation phase.
We will be in a net cash position. It will not be a significant net cash. We will still be in a net cash position post the dividend distribution, which will give us a strong starting position to utilize then the full balance sheet and the full sort of tool set within the capital structure.
To build on Maria's, as we are receiving that proceeds of $875 million, and you also know around how much we're gonna distribute. The way when we talk about the net cash position also is us including then total earn-outs that we have committed to in the different gaming companies that we incorporated across 2021 as well. That is the definition then.
I think that, with what you know, when it comes to the debt that we carry on our balance sheet and also the obligations that we have booked on our balance sheet with reference to earn outs, then it should be possible for you to at least have an idea of what our net debt position would be like.
Great.
Arnd, and maybe Arnd.
Yeah.
Could you take the second part of Oscar's question?
Yeah, sure. Hi, Oscar. Since 2015 we have built up a strong network of potential targets, companies we are screening, monitoring. If you take Ninja Kiwi, that has been in the making over, I would say 4 years, 5 years, and then it was just the perfect timing. We have continuously screened the market and, as I said, more than 30 companies we are in discussions with. Something definitely will happen in 2022. We just trying to find the right timing. Now with the existing companies, we also attract entrepreneurs from their network. We pursue two different type of M&A tracks. One are roll-ups under the existing studios and then standalone acquisitions.
Perfect. That's very helpful. Thank you. Just a final question from me then. A boring question perhaps, but in your previous structure you have some long-term incentive costs and central costs of course, even though it's lower than it has been historically. Any indication here of how much that is, how much of that is related to Esports and whether there are any sort of savings to be made? Although I realize it's still early at this stage, but any indications would be helpful. Thank you.
Thanks Oscar for the question. I'm gonna provide you with a cliffhanger here. As we have been calling for a capital market day following the close of the transaction, we will then more thoroughly go through the new MTG when it comes to the setup, both when it comes to organizational setup, but also of course the strategy going forward. Stay with us, Oscar there, and hopefully we can provide you with some enlightenment at that time point as well.
Understood. Thank you very much and congratulations again.
Thank you.
Thanks Oscar. Operator, we could have the next question, please.
Thank you. Your next question comes from the line of Martin Arnell from DNB Markets. Please go ahead, your line is open.
Yeah. Hi guys, this is Martin with DNB. I must also congratulate on this deal to start with. My first question is have you received any feedback from Valve as a result of this deal? Have there been any concerns from their side?
Good morning, Martin, and thank you as well. As regards to Valve, I mean, I think these are quite operational topics which ESL and FACEIT team will actually speak. I think the way we look at this is that this is an incredible transaction for the industry in which the combination of ESL and FACEIT is gonna elevate the product offering and the product proposition to the whole community. The way we look at this is that it should be super exciting to Valve to be a part of this journey. There's no other way to look at it differently.
Okay, thanks. Just, I don't know if you answered that before, but how do you look at the regulatory process before the deal can be approved?
Yeah, no, I think as we touched upon on the previous question, we anticipate this closing in Q2, and that's based of course on our assessment and also the counterpart assessment on the timing that is required from the different jurisdictions that we need to file. That of course gives you a couple of months timeframe, and we have no reason to believe currently that that should not hold true.
Okay. You think it will be a smooth process?
I think so, but it's always bold to say it's going to be smooth, but we have no reasons and indications that says anything else.
Okay. Thanks, Maria. Just on the build and buy strategy in gaming, you were very busy in 2021. Would you expect sort of the same aggressive pace when it comes to acquisitions or are you pausing temporarily a little bit and see what this integration of all these three big companies will lead to this year?
Thanks, Arnd. We're gonna hand that one over to Arnd as well. Arnd, if you could elaborate a bit on the M&A agenda.
Yeah. As you just said, in 2022 this year, focus will be on the center of excellence build out, leveraging the synergies and encouraging the collaboration as there's huge demand. On the other hand, with the M&A team, we're gonna continue the M&A track. Once we find the right target and it fits into our portfolio, it's definitely right time to continue investments. We are not going to bored, so we like to have a really high-quality approach and rather have some entrepreneurs who love to collaborate and benefit from centers of excellence instead of buying too many game studios. We'll be very selective approach while we also drive the center of excellence synergies.
Okay. Thanks, Arnd. Just on, when I have you on the line, Arnd, I want to ask you about Q4 specifically and but if you look in 2022, what are the prospects for you to return to organic growth in gaming?
I think that's.
I think I would hand over to Maria since she's given the numbers.
You know, I mean, we're still gonna come back to our Q4 report, and then we will give you the full update on Q4. You're gonna have to wait a few more weeks, Martin, and then we'll come back to that.
Okay. Thank you, guys. That's all for me.
Thanks, Martin. Operator, could we have the next question, please?
Thank you. Your next question comes from Thomas Singlehurst from Citi. Please go ahead. Your line is open.
Yeah. Good morning. It's Tom here from Citi. Congrats on the deal. It's, well, it's overall an, you know, very encouraging number. The question for you is, I mean, it's done now, so on one level it's academic, but I'm interested in, you know, why you're selling it now. Is it just because there was this, you know, opportunistic? The thing I was slightly concerned about is that potentially you're not necessarily gonna have seen the full benefit of COVID recovery. Therefore, you know, maybe selling it too early, and it could have been worth more. Then linked to that, I'm interested in the structure of the transaction as well, sort of clean cash exit makes it a lot easier for us.
interested in why you didn't elect to either retain a small stake in the combined entity or, you know, ask for some deferred consideration. Just a little bit of insight on that would be just useful just to know your thinking.
Yep. Good morning, Tom. It's all fair questions, and I think that we have spent quite a bit of time to think about it on our end, to be fair, because as I said as well in my presentation, we're a true believer in the combined ESL and FACEIT Group equity story and strategy. What has been really important for us is, and I think you heard us saying that quite a few times, that we believe that it's important we grow on the B2C side, and we wanna expand our universe from e-sports into competitive gaming and really be a relevant sort of end-to-end player there. There are different ways to obtain that. You can either do it organic and initiatives, and we have been driving some initiatives, or you do it inorganic.
I think if you do it inorganic, for us, it all comes down to relevance. Of course to partner up then with the number one sort of platform, it makes all the sense in the world. The question is, of course, how do you enable that? What kind of resources do we have in order to do so? What kind of other investment opportunities do we have? I think that's where it becomes a numbers game, and it's all about capital allocation. We think the fact that we've been a great owner of this asset now for 7 years, with this transaction, we can recognize a 2.5 return for our shareholders.
We can distribute back 40% of that net proceeds, and we can enable the business combination, which is really in line with what we have said all along in our strategy. We want to build a more relevant gaming and Esports vertical. This transaction enables that, and we didn't feel that we could enable this merger otherwise, and that would have been a massive value loss, as we believe. By realizing then the investment and the return on the investment, we can then accelerate the opportunities that we have on the gaming side. The way we look at it really does become a win-win.
You can always say that we could have made a higher return in years to come, and that could have been so, but I think that then we would have risked this transaction, and I think that would have been lost value. When it comes to the deal, I mean, that is just something you always discuss with a partner, and I think we felt that this was actually the cleanest deal structure. We're very happy with the deal in its totality, the timing of it, and the structure of it.
That's very clear. I then one quick follow-up. I mean, you've already sort of really mentioned that the emphasis now is gonna be on this sort of pure play mobile gaming side. You know, importantly though, it does feel like the ESL adventure has been a massive validation of your sort of holistic ecosystem approach to gaming. I mean, is there any chance that you might consider something, a sort of left field acquisition, you know, creating another new vertical, addressing another part of the ecosystem? Or, you know, should we really lock you in our minds as a pure play mobile gaming business from here on in?
Yeah. I think our legacy with ESL will always stay with us, and I think that hopefully also all the entrepreneurs out there will see with the journey that we've had with ESL and the way we worked with the ESL management team and supported them and stood by them. I think that will resonate with all the future entrepreneurs out there. What we now will focus on is to become a pure play gaming company. If we will venture out something broader over time, I mean, in that case, we'll come back to you and talk to you about that if and when that is relevant. For now, you should expect us to remain very focused and build a stronger and more relevant gaming vertical. I think there is great opportunities out there.
There is an industry consolidation going out there, and I think we want to take an active part of that, and we believe that we have a relevant place to play. Back to Arnd's point, we will always remain very selective and focused, and I think when you look at the three acquisitions we've done the last 12 months, I mean, that makes the case that we're really good on not just finding great companies, but also paying fair valuation, and that will become value creative for our company and the portfolio. That's what we will do right now.
Perfect. Well, makes a lot of sense. Thank you very much, and congratulations again.
Thank you, Tom.
Operator, we could have the next question, please.
Thank you. Your next question comes from the line of Rasmus Engberg from Handelsbanken. Please go ahead. Your line is open.
Hello. I think that's me. That's me. It's Rasmus Engberg with Handelsbanken. Yeah, I'm quite familiar with FACEIT, but I don't know their owner group, Savvy Gaming. I mean, if this deal is already fully financed and so on, or is there any sort of things that need to happen to this, I mean, like a loan or some sort of issue or similar things. Can you talk about that group, really? Who is backing it?
Yep. No, absolutely, good morning, Rasmus. We were a bit uncertain who it was. I think, I mean, FACEIT is known by the market for a long time, and we have of course been closely working with them for quite some time and discussed now the last year in much more close sort of discussions. Savvy Gaming has actually been around for a time. It has not been around in the shape and form it is now because it's newly created in its existing form. We actually been working with people behind Savvy Gaming now for close to two years on an operation level. They are funded by the sovereign wealth fund of Saudi, the PIF, which means that they are fully funded.
What excites us in particular is that they're extremely committed to the industry, both Esports and the greater competitive and sort of gaming community. They have a long-term vision that would support the ESL and FACEIT groups. We're very excited about, A, the transaction, and then, B, finding Savvy Gaming as the perfect partner.
Thank you. That was my only question. I must say, along with everyone else, it's a great deal, and I think it's good that you found one niche to focus on. Thanks.
Thank you, Rasmus. Appreciate that. Operator, are there any final questions?
There are no further questions at this time, sir.
Thank you. That concludes our formal presentation. We thank everyone participating in today's call, and we look forward to stay in touch. Please remember that we will release our fourth quarter interim report the seventh of February. Thank you very much. Take care. Goodbye.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Thank you. Bye-bye.
Thank you.