VGW’s Founder, Laurence Escalante, has succeeded in his bid to take the company private after shareholders approved his takeover offer.
91% of VGW’s minority shareholders voted in favour of the scheme, which will see them receive AU$5.05 (£2.42) per share, valuing the company at AU$3.2bn (£1.6bn).
Escalante already owned 70% of VGW, which will now become part of Ocean Bidco Limited – a special purpose company set up for the transaction.
Escalate intends to incorporate VGW in Guernsey.However, the company’s office will remain in Perth.
Regulatory headwinds
Escalante has raised AU$1.26bn in financing to facilitate the takeover of VGW despite the sweepstakes model facing intense scrutiny in the US.
Across the US, lawmakers and regulators have been seeking to ban the sector via legislation and cease and desist letters against operators. Earlier this year, Montana and Connecticut became the first two US states to bring into law bans on the vertical.
“The regulatory and competitive environment in which our business operates is becoming increasingly uncertain and the risks have markedly increased over the past 24 months,” said Escalante in a note to shareholders when he presented his offer.
“While I remain confident in VGW’s business and believe that BidCo and VGW will be strongly positioned to create and deliver value in the casino-themed social games market, we are also conscious of the risks in the regulatory and competitive environment in which we operate.”
Earlier this week, VGW stopped offering Sweeps Coins play in New Jersey after a passage of a bill to ban the products in the state.
Previously, the company has also ceased offering sweeps play in many other US jurisdictions, including Connecticut, Montana and New York, all of which have banned sweepstakes casinos this year.
The end of an unhappy relationship
The successful takeover also ends what has often been a tumultuous relationship between Escalante and VGW’s minority shareholding.
Some believed that his offer undervalued the company, despite independent analysts Kroll Australia assessing it as “fair and reasonable”.
Escalante further angered shareholders when it was revealed that he had setup a second sweepstakes casinos business, Kickr Games, which is led by Todd McKee, a former executive at VGW.
Although small in comparison, shareholders felt that Kickr acted as a direct competitor of VGW. However, VGW told the Australian Financial Review that it is “completely separate” and has “no impact” on VGW or its operations.
Escalante’s takeover bid must now be approved by the Federal Court, and it will be implemented on 20 August if this step is successful.
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