Citing concerns about productivity and profitability, 120 NetEnt workers are reportedly being made redundant as the producer of casino content finalises its Red Tiger acquisition.
NetEnt has changed its corporate plan to ensure complete alignment with Red Tiger, after purchasing the company in September 2019. The company has confirmed that the redundancy steps are “in line” with its plan to upgrade all business pieces, which it hopes will boost the company’s competitiveness and enhance the value development.
The restructuring is expected to help save about SEK150 m on a cash-flow basis, beginning in the second half of 2020. This means NetEnt is growing its initial estimation of possible synergies from the acquisition to about SEK250 m per year (from previously announced SEK150 m per annum).
Restructuring costs are estimated to amount to around SEK25 m, which for the first quarter of 2020 will be listed as non-recurring expenses and affect the operating income.
NetEnt company chief executive Therese Hillman said: “We are now entering the next phase of the integration with Red Tiger, whose sellers are also becoming shareholders of NetEnt.
“The integration will unleash the full potential of our shared capabilities, create significant efficiency gains in games development and strengthen our position as the market leader in online casino.”
NetEnt has also reported that a direct issue of new shares and cash payment would restore the earned-out credit for Red Tiger.
NetEnt has come to an agreement to help the merger, which means the conditions for payment of the earn-out allowance have been officially met. Half of the earned-out allowance will be paid out in the second quarter of 2020 by a direct issue of new B-shares, and the balance will be paid in cash in the second quarter of 2021.
The addendum to the SPA is subject to approval by NetEnt’s Annual General Meeting of Shareholders, scheduled for April 29 2020, of a direct issue of 6,327,175 B-shares to Red Tiger sellers.
The new shares will be issued at a price of SEK21.34 per share, which is the volume-weighted average price of NetEnt’s B-shares on Nasdaq Stockholm between February 24–March 20, 2020.
Since this financial liability element was previously reported using the discounted net present value, early redemption in the first quarter of 2020 leads to an rise in financial costs of approximately SEK35 m, which did not impact the cash flow. Following the issue of rights the net debt of the company is expected to decrease by SEK100 m.
NetEnt reported that, so far, the COVID-19 pandemic has not impacted its operations. The company announced that revenues for the NetEnt Community grew in line with market expectations during the first quarter of 2020 and are expected to range from approximately SEK490 m to SEK500 m, respectively.