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Almost a year after NeoGames agreed to be acquired by Aristocrat Leisure for approximately $1.5bn, the Nevada Gaming Control Board (NGCB) granted initial approval of the merger on Wednesday (April 3), another step in finalizing a deal that creates a global online gaming and lottery supplier.
“We believe this transaction will be transformational to our business and lays the foundation to fulfill our ambition to be a global leader in online gaming,” said Tracey Elkerton, chief compliance officer of Aristocrat Leisure.
Aristocrat announced on May 14, 2023 that it would pay $29.50 per share to acquire 100 percent of the Nasdaq-listed firm’s shares. The price tag represents a premium of almost 130 percent to NeoGames’s last closing of $12.84 on May 12, 2023.
The Nevada Gaming Commission (NGC) was expected to grant final approval to the deal at its meeting this month.
Elkerton explained to the control board that the company intended to fund the transaction from the 3.2m in Australian dollars in cash on hand. She said the current plan is for Aristocrat Technology Gaming System (ATGS) to receive dividends and loans to fund the deal.
“To the extent dividends are paid, these will go up the chain to our parent company, Aristocrat Leisure Ltd.,” Elkerton said. “To the extent cash is loaned to ATGS, this will be a straightforward inter-company loan between cash holding entities.”
Elkerton admitted Aristocrat was still working through the steps of how the company will move the money around its subsidiaries and the exact number of shares to be issued and will come back to the control board with the final position when it is available.
Under the terms of the acquisition agreement, NeoGames will transfer its statutory seat, registered office and seat of central administration from Luxembourg to the Cayman Islands and will become a wholly-owned subsidiary of Aristocrat.
Once completed, NeoGames shares will cease trading on the Nasdaq market.
Elkerton said Cayman Island law requires an additional shareholder vote after all the approvals are granted, and the company views this vote as “merely a corporate finality.” According to Cayman Islands law, at least 66.7 percent of shareholders have to approve the merger in a second shareholder meeting.
“We are confident shareholder approval will be obtained at the second vote because NeoGames shareholders have already approved the acquisition and merger by an overwhelming margin.”
“In the very unlikely event that we are not able to complete the acquisition … NeoGames will be redomiciled back to Luxembourg and trading of its shares on Nasdaq will resume,” she added.
In terms of due diligence of NeoGames’s business, Elkerton told the three-member control board that background checks have been conducted on all of executives and key employees and a “deep review” of all the jurisdictions they operate in currently has begun.
As of Wednesday, Aristocrat had completed its review of 50 countries which comprise almost 90 percent of gross gaming revenue across all four businesses. There are an additional 150 NeoGames jurisdictions that need to be reviewed over the next 12 months.
Elkerton added that a new framework has been developed for entering new jurisdictions, which allows her, the chief compliance officer, to approve any jurisdiction that is rated as low risk, while high-risk jurisdictions need to be approved by the regulatory and compliance committee.
She said they will be in front of the Louisiana Gaming Control Board on April 15 for a hearing involving a minority institutional investor application, and after that approval, the board has indicated it will issue approval for a change of control.
Board member Brittnie Watkins appreciated the update on Louisiana but asked for the latest on the approval process in New Jersey and Illinois.
“So, the transactional waiver will occur on the day we close in New Jersey,” Elkerton said. “It is not a condition of closing in New Jersey.”
In Illinois, Elkerton said a verbal update had been received last week from gaming regulators that they do not need to approve the transaction for the change of control. “We are just waiting for that in writing,” she said.
Watkins also asked Elkerton to explain to her what a low-risk jurisdiction is.
“Nevada would be a good example of what we would call a low-risk jurisdiction,” Elkerton said. “We do have a framework that documents the exact definition, but low risk would typically be a reliable gaming body in place, and laws, regulations and technical standards in place.”
A low-risk jurisdiction, according to Aristrocrat guidelines, would also have a process in place to certify products through an independent body or the gaming board, as well as a strong money laundering regime in place and enforcement actions taking place.
Elkerton told the NGCB that NeoGames comprises four business segments that are highly complimentary and all operate a common technology stack “that will facilitate seamless integration in our expansion of online gaming.”
The first business, Elkerton said, was NeoGames, an iLottery platform offering content, platforms, and services primarily to North America and Europe. The three other businesses are Aspire Global, an online gaming platform, Pariplay, which offers iGaming content, and BtoBet, a sports-betting platform that operates mainly in Europe, Africa, and Latin America.
“Together, Aristocrat and NeoGames will have a presence across the full online gaming value chain,” Elkerton said. “International growth opportunities for the combined group included expansion into the North American market segment as well as more broadly across Europe and the rest of the world.”
