Nevada regulators approve Sega Sammy acquisition of GAN

Thursday, September 26, 2024 8:47 PM
Photo:  CDC Gaming
  • Buck Wargo, CDC Gaming

The Nevada Gaming Commission Thursday signed off on Japan-based Sega Sammy Creation acquiring financially troubled GAN. The deal for GAN, the B2B provider of internet gaming and international B2C operator of internet sports betting, is expected to close in late 2024 or early 2025.

Sega Sammy Creation is a Japanese subsidiary of Sega Holdings Inc., an international conglomerate operating in the entertainment, gaming, and resorts businesses.

Sega Sammy Creation President and COO Naoki Kameda told the Commission that they used to be one of 95 segments with the corporate entity, but there’s now a greater focus on the gaming industry.

“It’s going to be one of the top three in the Sega Sammy group,” Kameda said, “a leading company for the gaming business from now on.”

Sega Sammy Creation is a gaming-machine manufacturer; Sega Sammy Holdings, Inc., offers consumer and arcade-game content, toys, and animation.

The Pachislot and Pachinko Machines Business involves development to sales of Pachinko/Pachislot machines. The Resort Business develops and operates hotels, including as a partner at Paradise City Casino in South Korea.

The acquisition allows Sega Sammy to expand to the online business, not only in the U.S., but in Europe. It’s part of a parent-company strategy to focus on digital. “Sports betting and igaming and other companies will be under Sega Sammy as well,” Kameda said.

GAN is a business-to-business supplier of internet gambling software predominantly to the U.S. land-based casino industry and a business-to-consumer operator of online sports betting technology internationally in European and Latin American markets. In its B2B segment, GAN has developed a proprietary internet gambling enterprise software system, GameSTACK, which it licenses to land-based U.S. casino operators as turnkey technology for regulated internet gambling, sports betting, and social-casino gaming branded as Simulated Gaming. Its second version of GameSTACK is awaiting approval from Nevada regulators by the end of the year.

“We would like to aim for setting up the business model, especially in the U.S., as an omnichannel solution provider,” Kameda said. “We would like to provide data solutions for land-based casinos. We don’t want to be an enemy of land-based casinos. It’s totally the opposite. Sega is known for a good online operation and we would like to partner with land-based businesses to grow the gaming business, including online gaming, together.”

Kameda said they can bring a lot of intellectual property to the gaming business. “We have multiple hit titles on slot machines, which we’d like to bring to online and land- based and create new business with GAN.”

The Commission previously granted a two-year conditional license to GAN Limited after raising questions about the company’s management turnover and financial problems.
GAN’s market 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

Kameda recognizes the concerns about GAN’s financial position and Sega Sammy can help with its cash reserves and support GAN as needed.

“Your company has a splendid balance sheet and it’s nice to have those kinds of ratios,” said Commission member Brian Krolicki.

Krolicki brought up the market cap of GAN lower than the price. “There’s a broad range and you’re coming in at a higher point than that range.”

Sega Sammy purchased a $30 million loan that Beach Point Capital made to GAN in 2023.

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. Upon the completion of the merger, GAN will cease to be a publicly traded company and its ordinary shares will be delisted from The Nasdaq Capital Market and deregistered.

GAN closed at $1.74 on Thursday.