8-K: Golden Matrix Group to Acquire Controlling Stake in Australian Discount Platform Classics for a Cause

Golden Matrix Group has entered into an agreement to acquire an 80% controlling interest in Classics for a Cause, an Australian online discount platform, marking its entry into the consumer loyalty and rewards industry.

Summary

• Golden Matrix Group (GMGI) is set to acquire an 80% stake in Classics for a Cause (CFAC), an Australian online discount platform.
• The acquisition will cost approximately $8.4 million, with 70% paid in cash and 30% in GMGI stock.
• The deal includes a holdback and earnout based on CFAC's post-closing performance.
• GMGI will also have a call option to acquire the remaining 20% minority interest.
• CFAC generated over $10 million in revenue and more than $1.9 million in operating profit before tax for the 12-month fiscal year ending June 30, 2024.
• CFAC has a customer base of over 300,000, with more than 10,000 active monthly subscribers.
• Recurring monthly subscribers contribute over 30% of CFAC's total revenue.
• The effective date of the acquisition is set for August 1, 2024, with closing expected within the next several days.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strategic acquisition, strong financial performance of the target company, and the potential for future growth. The language used is optimistic and confident, indicating a positive outlook from management.

Positives

• The acquisition provides GMGI with entry into the consumer loyalty and rewards industry.
• CFAC has a strong customer base and recurring revenue stream.
• The acquisition is expected to be accretive to GMGI's revenue and cash flow.
• CFAC has a history of generating free cash flow.
• The deal includes a call option for the remaining 20% minority interest.
• CFAC has a social media following exceeding 50,000.

Negatives

• The acquisition is subject to customary closing conditions, which could potentially delay or prevent the deal from closing.
• The earnout component is contingent upon CFAC meeting certain post-closing profit targets, which may not be achieved.
• The financial information of Classics provided is based on information internally compiled by Classics and has not been reviewed or audited by an independent auditing firm.

Risks

• The ability of the parties to close the acquisition on the terms set forth in the agreement.
• The occurrence of any event that could lead to termination of the acquisition agreement.
• The ability to meet the closing conditions of the agreement on a timely basis.
• The future revenues and profitability of Classics following the closing.
• The ability to integrate the operations of Classics into GMGI's current operations.
• The ability to scale Classics and achieve expected synergies and benefits.
• Potential dilution caused by the issuance of GMGI stock for the acquisition.
• The potential for additional regulations, restrictions and requirements as a result of the acquisition.

Future Outlook

The company anticipates scaling CFAC, implementing cost efficiencies, upgrading its technology, and further strengthening its free cash flow. CFAC plans to expand into new markets, including the U.S.

Management Comments

• Brian Goodman, CEO of Golden Matrix, stated that the acquisition aligns with their strategy of acquiring profitable and accretive businesses and expects similar results to their previous acquisition of RKings Competitions.
• Thomas Bailey, founder of CFAC, expressed excitement about joining forces with GMGI and expanding CFAC into new markets.

Industry Context

The consumer loyalty and rewards market is forecasted to grow at a CAGR of 9.5% from 2024-2028, increasing from $3.64 billion in 2023 to $5.79 billion by 2028, according to Research and Markets. This acquisition positions GMGI to capitalize on this growing market.

Comparison to Industry Standards

• The acquisition of Classics for a Cause is similar to Golden Matrix's previous acquisition of RKings Competitions, which has been a significant contributor to their revenues and profits.
• The purchase price of approximately 5x profits before tax is within the range of typical valuations for similar acquisitions in the online discount and loyalty space.
• The growth rate of the consumer loyalty and rewards market, as projected by Research and Markets, indicates a strong potential for future growth for CFAC under GMGI's ownership.
• The recurring monthly subscriber base of over 30% of CFAC's total revenue is a positive indicator of customer loyalty and stability, which is a key metric for online subscription businesses.

Management Changes

Stakeholder Impact

• Shareholders: The acquisition is expected to be accretive to GMGI's revenue and cash flow, potentially increasing shareholder value.
• Employees: CFAC employees will become part of the GMGI organization, with potential opportunities for growth and development.
• Customers: CFAC customers will continue to benefit from the discount platform and may see expanded offerings.
• Suppliers: CFAC's suppliers will become part of GMGI's supply chain.
• Creditors: The acquisition may impact the financial structure of CFAC, potentially affecting creditors.

Next Steps

• The acquisition is subject to customary closing conditions, expected to be fulfilled within the next several days.
• GMGI will integrate CFAC's operations into its existing business.
• CFAC will expand into new markets, including the U.S.
• GMGI will implement cost efficiencies and upgrade CFAC's technology.

Key Dates

Keywords

acquisition, online gaming, consumer loyalty, rewards, discount platform, Classics for a Cause, Golden Matrix Group, eCommerce, Australia, B2C, promotional giveaways