8-K: MGO Global Transfers Messi Licensing Rights to Centric Brands in $2 Million Deal

MGO Global Inc. has agreed to transfer its rights and obligations under a licensing agreement with Leo Messi Management SL to Centric Brands LLC for $2 million, along with the assumption of certain guaranteed payments.

Summary

• MGO Global Inc. has entered into an agreement to transfer its rights and obligations under a Trademark License Agreement with Leo Messi Management SL to Centric Brands LLC.
• The deal involves MGO's subsidiary, MGOTEAM 1 LLC, assigning the license agreement to Centric Brands.
• Centric Brands will pay MGO $2 million in cash as consideration for the transfer.
• Centric Brands will also assume MGO's minimum guaranteed payments due in 2024 under the license agreement, which amount to $1.5 million.
• The transfer includes the rights to the Messi Store website and related social media accounts.
• The effective date of the transfer is March 21, 2024, with the online store transfer expected by March 30, 2024.
• MGO will no longer be responsible for any minimum guaranteed amounts or royalty payments under the license agreement after the transfer.

Sentiment

Score: 7

Explanation: The deal is positive for MGO as it receives cash and is relieved of future obligations, but it also loses a revenue stream. The deal is likely positive for Centric Brands as it gains a valuable license.

Positives

• MGO receives $2 million in cash from the deal.
• MGO is relieved of its obligation to pay minimum guaranteed amounts under the license agreement.
• MGO is relieved of its obligation to pay any further royalty payments under the license agreement.
• The transfer allows MGO to exit the licensing agreement and focus on other business activities.

Negatives

• MGO is giving up the rights to the Messi Store website and social media accounts.
• MGO will no longer receive revenue from the Messi licensing agreement.

Risks

• There is a risk of downtime during the transfer of the Messi Store website.
• There is a risk that Centric Brands may not maintain the current functionality of the Messi Store.
• MGO remains liable for any issues arising from its operation of the Messi Store prior to the transfer.
• MGO remains liable for any issues arising from its actions under the Trademark License Agreement prior to the transfer.

Future Outlook

Centric Brands will take over the operation of the Messi Store and continue the sale of merchandise. Centric Brands is also entitled to negotiate directly with Leo Messi Management SL for any modifications or extensions to the License Agreement.

Management Comments

• MGO's CEO, Maximiliano Ojeda, signed the Term Sheet and Deed on behalf of the company.

Industry Context

This deal reflects a trend of brand licensing and consolidation in the sports merchandise industry, where larger companies like Centric Brands seek to acquire established licenses to expand their product portfolios and market reach.

Comparison to Industry Standards

• The transfer of a licensing agreement for a high-profile personality like Lionel Messi is a significant transaction in the sports merchandise industry.
• Comparable deals often involve a combination of upfront payments and ongoing royalties, with the specific terms varying based on the brand's popularity and market potential.
• Centric Brands, with its established infrastructure, is likely to leverage the Messi brand to achieve greater sales and market penetration than MGO Global could achieve on its own.
• The $2 million upfront payment and assumption of $1.5 million in guaranteed payments is a reasonable valuation for the remaining term of the license agreement.

Stakeholder Impact

• Shareholders of MGO Global will see a cash inflow and reduced liabilities.
• Employees of MGO Global may be affected by the transfer of the Messi Store operations.
• Customers of the Messi Store should experience a seamless transition with minimal disruption.
• Suppliers of the Messi Store may see a change in their business relationship.

Next Steps

• Centric Brands will take over the operation of the Messi Store by March 30, 2024.
• Centric Brands will assume all obligations under the license agreement from March 21, 2024.
• MGO will file any required pro forma financial statements within 71 days.

Key Dates

Keywords

Trademark License Agreement, Centric Brands, Leo Messi Management, MGO Global, Licensing, Assignment, Messi Store, Minimum Guaranteed Amounts, Social Media, E-commerce