Zordix AB (publ) (“Zordix”) has today entered into an agreement to acquire 100 percent of the shares in the British gaming publisher and game developer Merge Games Ltd (“Merge Games” or “the Company”). The purchase price amounts to a total of GBP 10 million on a cash and debt-free basis, of which GBP 4 million is paid in cash and 6 million in newly issued B shares in Zordix. Merge Games is an independent global publisher and developer of games for PC and console, founded in 2010.

The transaction in brief

• Today, Zordix has entered into an agreement to acquire 100 percent of the shares in the British game publisher and game developer Merge Games.
• During the period April 2020 to March 2021, Merge Games generated approximately SEK 147 million in revenue and SEK 33 million in EBITDA [1]. The company’s net sales have increased by 38% on an annual basis since the 2018/19 financial year [2].
• The purchase price amounts to a total of GBP 10 million on a cash and debt-free basis and consists of a cash part of GBP 4 million and a share in the form of newly issued Series B shares in Zordix to a value of GBP 6 million.
• The cash part of the purchase price will be financed through a loan facility of SEK 60 million.
• The part of the purchase price to be paid in the form of series B shares in Zordix (1,565,426 B shares) will be paid through a directed new issue to the sellers of Merge Games for which the board of Zordix intends to use the authorization received at the 2021 Annual General Meeting regarding new issue of shares. 
• 50% of the consideration shares have a lock-up period of twelve months and the remaining 50% of the consideration shares are subject to a lock-up period of six months, with the usual exceptions
• Provided that certain pre-agreed financial targets are met after accession until the end of the current financial year, a maximum of GBP 2.5 million may be paid in cash as an earnout.
• In addition to the above-mentioned earnout, the transaction contains a variable additional earnout that is based on EBITDA outcomes for the financial years 2021/2022, 2022/2023 and 2023/2024. The total value of the earnout is limited and is paid in half in Series B shares and half in cash. Series B shares issued in connection with any earnout will be subject to lock-up for twelve months.
• Access to the acquisition is expected in June 2021.

Background and motifs

Merge Games is an independent global publisher and developer of games for PC and console, founded in 2010 by Luke and Joanne Keighran, who still lead the Company. Since its founding, the Company has taken on several well-known titles such as Darkest Dungeon, Dead Cells, Cloudpunk, Streets of Rage 4, Yonder: Cloudcatcher Chronicles and Aragami. Recently released titles include Spirit of the North and Morbid: The Seven Acolytes.

In 2019, the IP rights to the survival game Smalland were acquired, and the Company has since invested in a handful of additional IP rights that are currently being developed or commercialized. In 2021, the titles Smalland (which has been “wish-listed” by a large number of Steam users), the highly anticipated Alex Kidd in Miracle World DX, the action-adventure game Foreclosed, the simulation game Monster Harvest and the strategy game Definitely Not Fried Chicken, are expected to be launched.

In addition to development and publishing in both digital and physical channels, the Company also has a business area called Signature Edition – with sales of collectibles in the premium segment – as well as significant income from so-called “Back catalog” of older game titles.

Merge Games has a strong position on the market, and a long history of successfully taking games to new platforms and markets. Through the acquisition, Zordix strengthens its publishing capacity and sees good opportunities to further accelerate Merge Games’ growth through collaboration with other companies within the Group, and by launching current and new development projects in-house.

During the period April 2020 to March 2021, Merge Games generated approximately SEK 147 million in revenue and SEK 33 million in EBITDA. The company’s net sales have increased by 38% on an annual basis since the 2018/19 financial year.

Comment from Zordix CEO Matti Larsson:

“We are very happy and proud today to welcome Merge Games to the Zordix family. I am very impressed by Luke and Joanne’s ability to jointly develop such a successful publishing business for an international market. That they are driven by the same enthusiasm as the other entrepreneurs in the group to build a profitable and expanded business together is absolutely fantastic. With Merge Games, an important piece of the puzzle is in place, which means that we will achieve really great success in the future.” 

Comment from Merge Games CEO Luke Keighran:

“We are incredibly proud to be part of the Zordix family today. We see many synergies between us. Merge Games extensive publishing and distribution experience combined with the Zordix Group’s ambitions will enable our growth to accelerate over the coming years.” 

1] Accounts are based on unaudited management accounts and Zordix estimates prepared according to K3 accounting standards. The company’s reported sales amounted to GBP 11.3 million and EBITDA to GBP 1.5 million and GBP 1.4 million in development costs that have not been capitalized.
[2] Merge Games’ fiscal year runs from 1st October to 30th September.

For further information, please contact:

Matti Larsson, CEO
Email: [email protected]

For more information about the company and investments, contact [email protected].

This information is information that Zordix is ​​required to publish under the EU Market Abuse Regulation. The information was submitted, through the care of the above contact person, for publication on 2021-05-27 08:00 CEST.

About Zordix
Zordix is ​​a multinational developer, publisher and distributor of video games, headquartered in Umeå, whose business concept is to develop and publish games for PC and console on the global market. Acquisitions of other companies, long-term investments in IPs, and investments within the framework of its own publishing operations, are the main components of Zordix’s growth strategy. The group as a whole has over a 25-year period participated in launching over 60 games on the global market, and is today made up of three game studios, its own publisher, and a distributor.

www.zordix.com

Augment Partners AB, [email protected], tel: +46 8-604 22 55 is Zordix AB (publ)’s Mentor.