TBH to sell retail asset to focus on path to profitability with wholesale business and Global Tote
TBH to sell retail asset in $6m deal plus ongoing revenues
- TBH to sell TopBetta and Mad Bookie retail businesses to PlayUp for $6million.
- TBH to enter into a software and services agreement with PlayUp for the provision of various risk management, technology and software services.
- TBH to retain 20% of the retail revenue from TopBetta and Mad Bookie brands as part of the software and services agreements.
- TBH may receive up to 20% of the revenue from PlayUp's current and future wagering revenues subject to software and services provided to PlayUp.
- Deal greatly reduces cost base of the TBH business and provides substantial funding for the wholesale business and The Global Tote.
- TBH has entered into a binding heads of agreement ("Agreement") to sell 100% of its shares in TopBetta Pty Ltd ("TopBetta") to PlayUp Limited ("PlayUp") in consideration for $6million in cash (plus GST)("Sale"). PlayUp has also committed to issue TBH with 800 million PlayChips if and when TBH develops and launches a cryptocurrency tote product (see further details below) ("Crypto Tote"). TBH notes that the Sale is not conditional on the launch of a Crypto Tote or the issue of the PlayChips.
- Pro-forma effect of the Sale means TBH would see an 18% reduction in revenue offset by a 48% reduction in cost base(1).
- TopBetta is a wholly owned subsidiary of TBH and operates TBH's retail business offering of fantasy sports and online wagering under the 'TopBetta' and 'Mad Bookie' brands ("Retail Business").
- Post-completion of the Sale, TBH will provide, through its subsidiaries, licenses and services in connection with TBH's software and technology products to PlayUp's wagering brands (including TopBetta and Mad Bookie) for agreed service fees.
- TBH Board believes the Sale will provide sufficient funding to execute on its wholesale business strategy over the next 12 months, focussing on its B2B products ("Wholesale Business").
1 These figures are provided on an unaudited basis.
TBH CEO, Todd Buckingham, said: "This deal is a significant step for the Company. Not only does the $6M sale of the retail assets provide significant funding for TBH, but the ongoing services agreement and revenue share greatly reduces our cash burn while allowing us to focus on developing the existing wholesale and Global Tote business."
"We have developed a full suite of wholesale wagering products that we can deliver to operators around the world. Now, with the more focussed business model on delivering new and innovative products to wagering operators, we believe we will be the wholesale provider of choice for operators when they consider their wagering platforms, odds and risk management systems and customer facing software."
"We are excited by the ongoing relationship and opportunities with PlayUp which will complement our expansion strategy."
PlayUp's CEO, Daniel Simic said: "PlayUp is excited to be working with TBH and to have successfully secured the TopBetta & Mad Bookie retail businesses."
"We believe TBH's innovative wholesale products have the potential to be real game changers in the global wagering industry."
The Board expects that, post-completion of the Sale, TBH will be funded to execute on its wholesale business strategy over the next 12 months, focussing on the significant potential of, and opportunities for, TBH's wholesale products. For the avoidance of doubt, TBH's Wholesale Business includes continuing to develop online wagering products for distribution in the retail market by its wholesale partners, including the retail wagering platform which currently drives the TopBetta and Mad Bookie businesses.
With the completion of Sale, the Wholesale Business will be TBH's primary focus allowing for delivery of more innovative products to complement the suite of technology it has developed, owns and operates.
TBH's technology stack includes: odds compilation system, data management, risk management system, odds management technology, client management system, white label wagering solution, tote system, fixed odds racing product suite, and informatics solution.
Completion of the Sale is subject to TBH receiving all requisite ASX and shareholder approvals and consents, including, without limitation, the requirements of Chapter 11 of the ASX Listing Rules and, if applicable, Chapters 1 and 2 of the ASX Listing Rules.
TBH has engaged in discussions with ASX regarding the Sale, in particular, whether ASX Listing Rule 11.1 applies to the Sale. TBH notes that the Company will remain in suspension until ASX determines whether ASX Listing Rule 11.1 applies to the Sale.
Please also see further information in respect of the Sale set out at Annexure A.
Material terms of the Agreement
The material terms of the Agreement are as follows:
Sale of TopBetta:
- TBH has agreed to sell 100% of its shares in TopBetta to PlayUp for $6million in cash (plus GST). PlayUp has also committed to issue TBH with 800 million PlayChips if and when TBH develops and launches a Crypto Tote. TBH notes that the Sale is not conditional on the launch of a Crypto Tote or the issue of the PlayChips.
- A $3 million non-refundable deposit ("Deposit") is payable within 5 business days after TBH satisfies or waives the Shareholder Approval CP (defined below). The Deposit is only refundable where TBH does not satisfy or waive each of the Conditions Precedent (set out below) by 31 July 2018.
- The remaining $3 million is payable on completion of the Sale.
Sale of TBH's Retail Business
- TBH will sell 100% of the shares in TopBetta. The Sale will not involve PlayUp acquiring any interest in TBH's Wholesale Business, or any assets used in connection with the Wholesale Business.
- The Sale will not involve PlayUp acquiring any interest in, or right to, any software, source code, technology or computer programs comprising the online wagering platforms used in connection with the 'TopBetta' or 'Mad Bookie' brands, including TBH's "fantasy wagering" tournament platform and TBH's online content platform (together "TBH Software Platforms").
- The Sale includes TopBetta's retail bookmaking licence granted by the Northern Territory Racing Commission (NTRC) in Australia, a simulcast and account deposit wagering service provider licence granted by the North Dakota Racing Commission (NDRC) in the United States and a combined remote operating licence granted by the Gambling Commission in Great Britain (UKGC). PlayUp will be required to complete due diligence process for these jurisdictions, however, the Sale is not conditional upon these processes being completed. The Sale does not include any of the licences which are required for TBH's Wholesale Business or operations in the UK and the US.
Conditions Precedent, Termination and other Terms
Completion of the Sale will be conditional upon satisfaction (or waiver) of the following conditions precedent on or before 31 July 2018:
- TBH and PlayUp agreeing to the terms of a white label agreement pursuant to which TBH will grant a license to PlayUp to use the TBH Software Platforms for the online wagering brands owned or operated by PlayUp from time to time (including the TopBetta and Madbookie brands) (together "PlayUp Brands");
- TBH obtaining, and complying with, all requisite requirements, approvals and consents from ASIC, ASX or other regulatory bodies;
- TBH obtaining all shareholder approvals as may be required under the Corporations Act 2001 (Cth) or the ASX Listing Rules, including, without limitation, any approvals required under Chapter 11 of the ASX Listing Rules and, if applicable, Chapters 1 and 2 of the ASX Listing Rules ("Shareholder Approval CP"); and o the successful negotiation, agreement and execution of the following transaction documents:
o a Share Sale Agreement;
o a Services Agreement (described further below);
o a White Label Agreement;
o a Global Tote Access Agreement;
o a Software Escrow Agreement; and
o such other documents that may be necessary to give effect to the terms agreed by the parties.
TBH can elect to waive any of the above conditions precedent at its sole discretion (other than the regulatory approvals referred to above). The Agreement terminates on 1 August 2018, or upon either party being affected by an insolvency event.
The indicative timetable for implementing the Sale is as follows:
Event Indicative Date Signing of the Heads of Agreement 13 April 2018 Dispatch of Notice of General Meeting of the Company's Shareholders 2 May 2018* Date of General Meeting 1 June 2018* Payment of $3M deposit On or before 6 June 2018** Satisfaction or waiver of Conditions Precedent On or before 31 July 2018 Completion of Sale 5 business days after the satisfaction or waiver of Conditions Precedent* These dates are subject to change.
** This date may change depending on the date of the General Meeting.
- From Completion, TBH will provide, through its wholly owned subsidiaries, services to PlayUp relating to the technical back-end operation and risk management of the TBH Software Platforms ("Services") to the extent that the PlayUp Brands use the TBH Software Platforms in accordance with the White Label Agreement.
- The Services must be provided for a fixed term of 24 months and the Services can only be terminated by either party where:
o either party breaches an essential term of the Services Agreement and does not rectify that breach within 14 days of being given notice to do so; or
o the other party suffers an insolvency event or makes any composition or arrangement with its creditors generally or takes advantage of any statute for relief of insolvent debtors.
- In consideration for the provision of the Services, PlayUp will pay a monthly service fee ("Service Fee") (exclusive of GST) equal to 10% of total 'Gross Wagering Revenue' per month of the PlayUp Brands which use the Services.
- In addition to the Service Fee and in consideration for the grant of the license to use the TBH Software Platforms, PlayUp must pay a monthly license fee (exclusive of GST) equal to 10% of total 'Gross Wagering Revenue' per month of the PlayUp Brands which use the TBH Software Platforms.
- Gross Wagering Revenue is calculated as: Bets placed, less Bet wins, less fees and taxes including race field fees and point of consumption tax if applicable.
- In the event that PlayUp breaches and essential term of the Services Agreement and TBH terminates or PlayUp terminates the agreement without cause, then PlayUp must pay to TBH (or its nominee) a fee per month equal to 10% of the monthly Gross Wagering Revenue of all wagering brands owned or operated by PlayUp post-completion until the date on which the Services Agreement would have otherwise terminated.
PlayChips and the Crypto Tote
PlayUp intends to deliver a fully-integrated, blockchain enabled global fantasy sports, online sports betting & gaming ecosystem. Underpinning its ecosystem, is the PlayChip Utility Token ("PlayChip"), a crypto-currency built on the Ethereum blockchain, specifically designed for use as a universal payment and rewards system for the online gaming industry.
TBH is currently considering developing a tote platform which will accept third party cryptocurrencies, in addition to traditional currencies. The Crypto Tote is still in concept phase and TBH is still considering the viability of, regulatory issues associated with, and proposed business plan for, the Crypto Tote.
Under the Agreement, PlayUp has committed 800 million PlayChips to TBH (or its nominee) for the purpose of seeding the Crypto Tote, if it is developed and launched. If TBH decides to develop the Crypto Tote, TBH will liaise with the ASX regarding such development and the application of Chapter 11 and ASX Listing Rule 12.5 at the relevant time.
TBH notes that:
- the PlayChips will only be issued if TBH proceed with the Crypto Tote; and
- the Sale is not conditional on the development or launch of the Crypto Tote, or the issue of the PlayChips.
Accordingly, the Sale will proceed regardless of whether the Crypto Tote is developed.
On the crypto currency PlayChips and the Crypto Tote, Mr Buckingham said: "We want to stress to the market that we have not put any value on this part of the deal when assessing the value to shareholders on the Sale, other than to say that TBH believes the Crypto Tote is an interesting concept, given the current interest in crypto currencies, and the commitment of the PlayChips will support the launch of a Crypto Tote if TBH decide to pursue it."
PlayUp Limited is a technology developer as well as a fully operational Fantasy Sports, Sports Betting and Online Gaming Platform. PlayUp Limited operates PlayUp.com, ClassicBet and DraftStars within its gaming and wagering ecosystem. PlayUp Limited will deliver the world's first fully-integrated, blockchain enabled global fantasy sports, online sports betting and gaming ecosystem.
PlayUp.com currently has more than 400,000 registered users and is represented by global sporting icons such as Brett Lee, who has amassed a social network of over 4 million sports fans. PlayUp.com offers Daily fantasy challenges which are free to play and easy to enter. Users simply create their fantasy team by selecting a line-up of real world players and the platform operates in real-time. As users move up the leader board they can win PlayChips and purchase prizes from the PlayUp.com Store. PlayUp.com offers daily fantasy challenges across the worlds biggest leagues from Cricket, Football, Basketball, Kabadddi, Rugby League, Ice Hockey, Basketball, Australian Football, American Football with plenty more on the way.
PlayUp Limited currently employs 27 fulltime employees with offices in Sydney (HQ), Melbourne, Darwin and Hong Kong. PlayUp Interactive Pty Ltd, a wholly owned subsidiary of PlayUp Limited, is a licensed gambling operator in Australia.
* As announced on 09 April 2018, PlayUp has agreed to merge with Mission NewEnergy Limited (ASX:MBT) (OTCMKTS:MNELF), subject to the approval of the ASX and NASDAQ and regulatory approval requirements. Upon the completion of the merger it is anticipated that the company's securities will seek to re-comply with both ASX and NASDAQ listing rules resulting in the trading of shares on the NASDAQ stock exchange and the ASX.
About Topbetta Holdings Ltd
TopBetta Holdings Limited (ASX:TBH) is an ASX-listed holding company and a global provider of online wagering products and services to both wholesale and retail markets through its various wholly owned subsidiaries. TopBetta Pty Ltd operates a retail wagering business, offering consumers wagering, fantasy tournament and content products and services. Global Tote Australia Pty Ltd conducts TBH's Wholesale Business, which includes operating and licensing its wholesale tote product which enables licensed wagering operators, including corporate bookmakers and tote operators from all over the world, to participate in global pools. The Wholesale Business is conducted under a B2B licence granted by the UK Gambling Commission to Global Tote Limited, a company incorporated in Alderney, UK.
Topbetta Holdings Ltd