INSIGHT
CATENA’S
US HOKEY COKEY
Unfortunate timing in Italy and the reset of earnouts payable on its
US assets is indicative of many more twists ahead for affiliate
consolidator Catena Media, writes Scott Longley
FLEXIBILITY IS A GOOD TRAIT
to have in business and Catena Media
can fairly say it has that attribute in
spades judging by the announcements
it has made since it bought the NJPlay
assets back in December 2016.
At the time, the deal was structured
so that the vendors received $15m
(£11.7m) upfront, 25% of which
would be paid with shares. There
was also an additional earnout of
up to $45m, which would be based
on the revenue performance over the
subsequent three years. These terms
applied to the online casino and
poker affiliate sites then operating in
New Jersey and Nevada.
Redoing the deal
But the deal came with a kicker
related to the potential for further
states to regulate online involving a
“range of assets” (including some
esports and DFS titles) whereby the
vendors would receive 50% of net
profit going forward, with a series
of put and call options in place for
Catena to gain full control after
three years.
The purchase price for these
“The new terms will see all earnings
between 1 November this year and 31
October next included in the earnout,
with a third earnout payment due
afterwards of up to $45m”
additional assets was set at 2.5 to 3
times the net profit generated by the
assets in the 12 months previous to
the exercising of the options. This,
remember, was against a backdrop of
DFS being somewhat on the wane.
That buyout price was reasonable and
both sides were likely happy.
The arrangements stood for just
over a year – until February 2018, in
fact, when, as we all know, there were
already rumours that PASPA was in
trouble in front of the Supreme Court.
With the prospect of the US opening
up to US sports, and with the vendors
controlling various websites aimed at
just such a potential market, the two
sides came to a new understanding.
This involved a rejigging of the
earnout plus a new structure for the
put/call options on the additional
assets. It restricted the original earnout
potential significantly, from $34.5m to
iGB Affiliate Issue 72 DEC 2018 / JAN 2019
43