Embracer Group: Buys a ticket to ride

Embracer Group: Buys a ticket to ride - ABG

Announces acquisition of board game company Asmodee Price of SEK 28-32bn, 12-14x ‘22/23e EV/adj EBIT The acquisition could add ~15% to cons ‘22/23e adj. EPS

Acquires a leading player in the board game market Embracer has announced the acquisition of the market leading international publisher and distributor of board games and collectable cards, Asmodee. It sells over 39m games annually and owns +300 different IPs and +970 games, including famous titles like Catan and Ticket to Ride. Like Embracer, Asmodee has been driving the consolidation in the board games sector and will now – as a new operating unit within Embracer – constitute a platform for further M&A in the board game sector. The initial consideration amount to SEK 28bn, whereof SEK 18bn will be financed via credit facilities, and the rest via new share and cash. In conjunction with the acquisition, Embracer announced a directed share issue of SEK 5.5bn. In addition, another SEK 3.5bn can be paid out to the sellers, bringing the maximum consideration to SEK 32bn. Could add 15-13% to ‘22/23e-‘23/24e cons EPS Asmodee generates proforma sales and adj. EBIT of SEK ~11,000m and SEK ~2,100m. The company forecast adj. EBIT of SEK 2,000-2,500m in FY’22/23e and SEK 2,300-2,900m in FY ‘23/24e. The midpoint of which correspond to ~30% upside to consensus estimates. Considering the dilution to the share count of ~15%, we estimate that the acquisition could add 15-13% to consensus ‘22/23e-‘23/24e EPS. Based on the forecast, the purchase multiple is 12-14x ‘22/23e adj. EBIT. Adds a new channel for Embracer’s IPs Although this acquisition is done at a higher valuation than usual for Embracer, we are positive on the prospects for the combined entity. We see board games as a new platform for Embracer’s IP-catalogue. The same goes for Asmodee who has already started experimenting with turning some of its IPs into video games. We also welcome Asmodee’s capital light business characteristics and high free cash flow conversion (70-80% of pretax profit) which can help boost game development.

Embracer Group: Buys a ticket to ride - ABG

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