The Nevada Gaming Control Board Wednesday signed off on Sega Sammy Creation acquiring GAN, the North American B2B igaming provider and international B2C operator of internet sports betting.
Sega Sammy Creation is a Japanese subsidiary of Sega Holdings Inc., an international conglomerate operating in the entertainment, gaming, and resorts businesses. The final approval now goes before the Nevada Gaming Commission on Sept. 26.
The Nevada regulatory proceedings follow the Committee on Foreign Investment in the United States clearing the proposed merger. After the final regulatory hurdles, the closing of the merger is expected in late 2024 or early 2025.
When completed, each GAN ordinary share issued immediately prior to the effective time of the merger will be automatically canceled and converted into the right to receive $1.97 in cash. GAN will cease to be a publicly traded company and its ordinary shares will be delisted from the Nasdaq Capital Market and deregistered.
In its B2B segment, GAN has developed a proprietary internet-gambling software system, GameSTACK, which it licenses to land-based U.S. casino operators as turnkey technology for regulated igaming, encompassing internet gambling and sports betting and social-casino gaming branded as Simulated Gaming.
Sega Sammy Creation Inc. is a gaming machine manufacturer. Sega Sammy Holdings produces consumer- and arcade-game content, toys, and animation. The Pachislot and Pachinko Machines Business conducts everything from development to sales of Pachinko/Pachislot machines. Its Resort Business develops and operates hotels.
When the deal was announced, GAN Chairman Seamus McGill noted that at the time, market-share concentration in the U.S. B2C space, a slower-than-expected adoption of regulated online gaming in the U.S., and changes to key customer contracts made the near-term operating environment challenging without ample capital resources. He said Sega Sammy has those resources and GAN is a strategic complement to their existing gaming portfolio.
In October, the Nevada Gaming Commission granted a two-year conditional license to GAN Limited after raising questions about the company’s management turnover and financials. The Commission backed a recommendation made by the Nevada Gaming Control Board.
Sega Sammy attorney Erica Okerberg with Greenberg Traurig’s global gaming practice assured the Board Wednesday that its concerns related to corporate governance and finances will be resolved by the acquisition.
Sega Sammy Creation President and COO Naoki Kameda said the acquisition allows the gaming manufacturer to expand into the online business, both in the U.S. and Europe. It’s part of a parent-company strategy to focus on digital.
“We’re putting more focus on the gaming business,” Kameda said. “We announced in April that the gaming business will be our third pillar of the Sega Sammy Group business.” Meanwhile, they’re enjoying their “growing moment” on the gaming-manufacturing side as well, with highly rated games.
“Sega Sammy Creations used to be one of 95 subsidiaries of Sega Sammy Group, but it’s going to be a core company of the gaming business,” Kameda said.
In Las Vegas, Kameda said they’re expanding their warehouse.
“GAN has done a nice job with Station Casinos for sports betting, but we would like to expand our business to work with other casinos in Nevada, so that we’re not an enemy of land-based casinos. We would like to be a partner, so we can expand our online platform together, rather than as a competitor.”
Kameda said they have a $500 million to $700 million budget to improve GAN systems and services. It could be used for other acquisitions as well.
“We’re a cash-rich company and ready to support GAN business financially,” Kameda said. “GAN has had financial concerns before, but we’re here to support that business.”
On the NASDAQ exchange on Wednesday, GAN traded at $1.74, down from just over $30 in February 2021.
“We want to make sure the business with Station Casinos goes well first,” said Kameda, who cited its working with the Fontainebleau Las Vegas. “We’re developing a good relationship. We’re waiting for this approval to have very positive conversations about Station Sports. GAN has all the systems. We can probably propose the sports betting business to other operators. Users are also waiting for social once the system is approved (by Nevada regulators) and the Station relationship is built up.”
Kameda said GAN’s technology for sports betting “is quite innovative.” The mobile app has an easy-to-use interface. Users can move from over the counter to a terminal.
“They’re migrating from their old platform to a new platform and we have more opportunity to grow into more casino games and new social games,” Kameda said. “We can have more of a portfolio under this platform. We’re really impressed by their new technology.”
