Vancouver, British Columbia--(Newsfile Corp. - June 27, 2024) - FansUnite Entertainment Inc. (TSX: FANS) (OTCQB: FUNFF) ("FansUnite" or the "Company") announced today that, together with FansUnite US Inc. ("FansUS"), a wholly-owned subsidiary of the Company that carries on its Betting Hero business, it has entered into a definitive agreement (the "Stock Purchase Agreement") with GeoComply Solutions Inc. ("GeoComply") and Hero Group Corp. (the "Purchaser"), pursuant to which the Company has agreed to sell to the Purchaser all of the issued and outstanding shares of FansUS (the ‎‎"Transaction"), for an aggregate purchase price of US$37.5 million, adjusted on a cash-free, debt-free basis. Following such adjustments, and the payment or discharge of the Obligations (as defined below), the Company anticipates net proceeds from the sale of FansUS of approximately US$20 million ("Net Proceeds"), assuming a closing date ("Closing Date") of the Transaction on or about August 15, 2024. Upon completion of the Transaction, the Purchaser will be controlled 60% indirectly by Betting Hero's co-founders, Jai Maw and Jeremy Jakary (the "Betting Hero Co-Founders"), and 40% by GeoComply.

Pursuant to the terms of the Stock Purchase Agreement, the Company has agreed to distribute 90% of the Net Proceeds (after payment or discharge of certain obligations and liabilities of the Company, including those associated with the Transaction or otherwise (collectively, the "Obligations")) to the holders (the "Shareholders") of common shares of the Company (the "Company Shares"), subject to applicable solvency and other legal or contractual requirements, as a return of capital on the Company Shares (the "Distribution"). There are a number of variables, known and unknown, that may impact the ultimate amount of the Distribution payable to the Shareholders, including the quantum of the Net Proceeds and the Obligations. While the Distribution may therefore be materially lower than the amount currently anticipated, based on the information available to the Company at the date hereof, it is anticipated that the Distribution to be paid to the Shareholders subsequent to the completion of the Transaction is likely, based on the USD/CAD exchange rate published by the Bank of Canada on June 26, 2024, to be in the range of approximately C$0.065 to C$0.075 per Company Share.

Quinton Singleton, an independent member of the board of directors of the Company (the "Board") and Chair of the Special Committee (as defined below), said, "Following review of the Transaction by the Special Committee, in consultation with our financial and legal advisors, we believe that this Transaction represents the best available path forward for the Company, its shareholders and other stakeholders. The Distribution will provide immediate liquidity to the Shareholders and the Special Committee is unanimous in its belief that the Transaction is in the best interests of the Company and the Shareholders."

Scott Burton, Chief Executive Officer and a director of the Board, stated: "After a long and thorough strategic evaluation of our business, we've received a substantial cash offer for our primary remaining asset. It not only reflects high market multiples when compared to similar transactions but also a substantial premium to our current share price. After extensive deliberation with our Board and advisors, we believe it's in the best interest to recommend the sale and allow the Shareholders to vote on a return of capital."

Special Committee and Board Recommendations

The Stock Purchase Agreement was approved unanimously by the Board, (with the abstention of Scott Burton and Chris Grove as interested directors), after taking into account, among other things, the unanimous recommendation of the special committee of the Board (the "Special Committee") comprised of Quinton Singleton and James Keane, each an independent director of the Company. The Special Committee and the Board (with the abstention of Scott Burton and Chris Grove as interested directors), determined that the Transaction is in the best interests of the Company and fair to the Shareholders (other than the Betting Hero Co-Founders), and the Board recommends that Shareholders vote in favour of the Transaction at the special meeting of Shareholders of the Company (the "Meeting").

Transaction Rationale

In making its determination to unanimously recommend approval of the Transaction to the Board, and in the Board's determination to approve the Transaction, the Special Committee and the Board considered the following factors, among other things:

  • Attractive Premium and Immediate Liquidity: The purchase price represents an attractive valuation for the FansUS business relative to market multiples for similar publicly traded companies and M&A transactions and the Net Proceeds should enable the Company to complete a Distribution in the range of C$0.065 to C$0.075 per Company Share‎, representing a premium of between 44% and 67% to the closing price of the Company Shares on the Toronto Stock Exchange ("TSX") on June 26, 2024, and a premium of between 71% and 97% to the 30-day volume weighted average price (VWAP) of the Company Shares on the TSX for the period ended June 26, 2024 (subject to the qualifications, assumptions and risks discussed elsewhere in this press release).‎ The Distribution will be paid entirely in cash and provide immediate liquidity and certainty of value for the Shareholders. In connection with the Transaction, the Company will eliminate all indebtedness of the Company and its subsidiaries which will prevent significant further dilution;

  • Formal Valuation and Fairness Opinion: BDO (Canada) LLP ("BDO") has provided to the Special Committee a formal valuation and fairness opinion in connection with the Transaction which provides an ‎opinion to the effect that, as of the date of such opinion and subject to the assumptions, limitations, and qualifications on which such opinion is based, the business enterprise value of FansUS is between US$31,000,000 and US$37,000,000, and the consideration to be received under the Transaction is fair, from a financial point of view, to the Company and the Shareholders (other than the Betting Hero Co-Founders (as defined below));

  • Support for the Transaction: Each of the directors and senior officers of the Company, each of the Betting Hero Co-Founders, and Tekkorp Capital LLC, who collectively beneficially own or control approximately 27% of the Company Shares, have entered into voting agreements with the Purchaser pursuant to which, among other things, they have agreed to vote in favour of the Transaction at the Meeting subject to the terms and conditions of such voting agreements;

  • Stock Purchase Agreement and "Fiduciary Out": The Stock Purchase Agreement is the result of extensive and deliberate arm's length negotiations that was overseen and supervised by the Special Committee and the Board, as advised by their respective highly qualified legal and financial advisors, and resulted in terms and conditions that are reasonable in the judgment of the Special Committee and the Board, including a customary "fiduciary out" that will enable the Company to enter into a superior proposal in certain circumstances;

  • Future Opportunity to Retain Exposure: The Company expects to retain net cash of approximately C$500,000 to explore new business opportunities for the economic benefit of the Shareholders who will continue to maintain their interest in the Company following completion of the Distribution; and

  • Procedural Protections: The Transaction is subject to a number of procedural protections under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), including the requirement for approval of a "majority of the minority" vote of the Shareholders in accordance with MI 61-101, in addition to approval by not less than two-thirds (66 2/3%) of the votes cast by Shareholders at the Meeting. In evaluating the Transaction, the Shareholders will have the benefit of enhanced disclosure requirements under MI 61-101 and the formal valuation and fairness opinion prepared by BDO.

Transaction Details

Pursuant to the Stock Purchase Agreement, as consideration for all of the issued and outstanding shares of FansUS, the Purchaser has agreed to ‎pay to FansUnite an aggregate purchase price of US$37.5 million as follows:

  • US$30.6 million, to be paid in cash on the closing of the Transaction after adjustment on a cash-free and debt-free basis; and

  • US$6.9 million, to be satisfied through the cancellation of the Demand Note (as defined below).

Following all such adjustments, and the payment or discharge of the Obligations, the Company anticipates Net Proceeds of approximately US$20 million, assuming a Closing Date of August 15, 2024. Pursuant to the Stock Purchase Agreement, the Company is required to distribute at least 90% of the Net Proceeds, subject to applicable solvency and other legal or contractual requirements, to the Shareholders.

Prior to the Closing Date, the Company will effect certain pre-acquisition reorganization steps (the "Pre-Acquisition Reorganization") involving, among other things, the issuance by the Company of a demand note (the "Demand Note") to the Betting Hero Co-Founders in the amount of US$6.9 million, to satisfy certain earn-out and other contingent payment obligations owing by the Company in favour of the Betting Hero Co-Founders. As a result of the Pre-Acquisition Reorganization, the Purchaser will be owned 60% indirectly by the Betting Hero Co-Founders and 40% by GeoComply. It is intended that after the Closing Date the Purchaser will continue carrying on the Betting Hero business.

The Stock Purchase Agreement contains, among other things, customary representations and warranties of each party, non-solicitation covenants with respect to acquisition proposals and a right of the Purchaser to match superior proposals. The Stock Purchase Agreement also provides for customary deal-protection provisions, including a right for the Purchaser to match any superior proposal and a termination fee of US$1.75 million ‎payable by the Company to the Purchaser if the Stock Purchase Agreement is terminated in certain ‎circumstances, including if the Company enters into an agreement with respect to a superior proposal or if the Board withdraws or modifies its recommendation in respect of the Transaction.‎

Completion of the Transaction is also subject to satisfaction or waiver of a number of conditions, including the receipt of requisite shareholder approval, TSX acceptance, all necessary ‎regulatory and third-party approvals, and other conditions customary in transactions of this nature.

The Transaction will constitute the "sale of all or substantially all" of the assets of the Company pursuant to the Business Corporations Act (British Columbia), and accordingly will require approval by not less than 66⅔% of the votes cast by the Shareholders at the Meeting, as well as by a simple majority of the votes cast by the Shareholders at the Meeting, excluding the votes cast by certain persons as required by MI 61-101. The Meeting is expected to be held in August 2024. The closing of the Transaction is expected to occur shortly thereafter.

Upon completion of the Transaction, the Company will no longer have any material property or assets. The Company will cease to carry on any active business and expects to retain net cash of approximately C$500,000 to explore ‎new business opportunities for the economic benefit of its Shareholders.

Additional details regarding the Transaction, the background to the Transaction, the reasons for the Board's and Special Committee's recommendations of the Transaction, and how Shareholders can participate in and vote at the Meeting, will be set out in the Company's management information circular (the "Circular") and other proxy-related materials to be prepared, filed and sent to the Shareholders in connection with the Meeting. Copies of the Stock Purchase Agreement and the Circular for the Meeting will be filed with Canadian securities regulators and will be made available on the SEDAR+ profile of the Company at www.sedarplus.ca. Shareholders are urged to read those and other relevant materials when they become available.

Formal Valuation and Fairness Opinion

Each of the Betting Hero Co-Founders, as a co-founder of the Betting Hero business and current senior officer of ‎American Affiliate ‎Co. LLC ("AmAff" or "American Affiliate"), a wholly ‎owned ‎subsidiary ‎of FansUS, is a "related party" of the Company as such term is defined under MI 61-101. After giving effect to the Pre-Acquisition Reorganization, the Purchaser will also constitute a "related party" of the Company as such term is defined under MI 61-101, as the Betting Hero Co-Founders will indirectly own a 60% equity interest in the Purchaser. Accordingly, the Transaction constitutes a "related party transaction" as such term is defined under MI 61-101.

In connection with the review of the Transaction, the Special Committee retained BDO to provide independent financial advice and prepare a formal valuation of the Company Shares (the "Formal Valuation") as required under MI 61-101. BDO orally delivered to the Special Committee and the Board the results of the Formal Valuation, completed under the Special Committee's supervision, opining that, as of June 26, 2024, subject to the assumptions, limitations and qualifications communicated to the Special Committee and the Board by BDO and to be contained in BDO's written Formal Valuation, the business enterprise value of FansUS is between US$31,000,000 and US$37,000,000. BDO also orally delivered a fairness opinion to the Special Committee and to the Board to the effect that, as of June 26, 2024, subject to the assumptions, limitations and qualifications communicated to the Special Committee and the Board, and to be contained in BDO's written fairness opinion (the "Fairness Opinion"), the consideration to be received by under the Transaction is fair, from a financial point of view, to the Company and the Shareholders (other than the Betting Hero Co-Founders). Copies of the Formal Valuation and the Fairness Opinion, and the summaries thereof, will be set out in the Circular.

Advisors and Counsel

Stifel acted as exclusive financial advisor to FansUnite, and BDO acted as independent valuator and financial advisor to the Special Committee. DLA Piper (Canada) LLP and DLA Piper LLP are acting ‎as FansUnite's Canadian and United States legal counsel. ‎Laurel Hill Advisory Group is acting as FansUnite's Shareholder Communications Advisor. Stikeman Elliot LLP is acting as legal counsel to the Special Committee. Fenwick & West LLP is acting as the Betting Hero Co-Founders' legal counsel. Blake, Cassels & Graydon LLP and Morrison & Foerster LLP are acting ‎as GeoComply's Canadian and United States legal counsel.

ABOUT FANSUNITE ENTERTAINMENT INC.

FansUnite is a global sports entertainment and gaming company. Our business is focused on the regulated and lawful sports betting affiliate market which includes customer acquisition, retention, support and reactivation. FansUnite has established itself as a leader in the North American affiliate market through its subsidiary American Affiliate. AmAff is a North American omni-channel customer acquisition company, covering both retail and digital customer activation for sportsbooks, casinos, poker and fantasy sports platforms.

ABOUT BETTING HERO

Betting Hero is the pioneering operator partner focused on customer activation, retention, and development for sports betting in the US. Powered by three core business units, Betting Hero Live Activation, Betting Hero Research, and Betting Hero Digital, Betting Hero is changing the game to deliver more excitement to new bettors and more value to operator partners. Betting Hero's accolades include 2023 EGR Employer of the Year, SBC Employer of the Year, and EGR Customer Onboarding Partner of the Year. Founded in July 2018 by Jai Maw and Jeremy Jakary, Betting Hero has grown to become a team of over 400 professionals dedicated to delivering thousands of high-quality activations yearly.

ABOUT GEOCOMPLY SOLUTIONS INC.

GeoComply provides fraud prevention and cybersecurity solutions that detect location fraud and help verify a user's true digital identity. Trusted by leading brands and regulators for the past 10 years, the company's geolocation solutions are installed on over 400 million devices and analyze over a billion transactions every month.

GeoComply's award-winning products are based on the technologies developed for the highly regulated and complex US online gaming and sports betting market. Beyond iGaming, GeoComply provides geolocation fraud detection solutions for streaming video broadcasters and the online banking, payments and cryptocurrency industries, building an impressive list of customers, including Akamai, Nextdoor, BBC, BetMGM, DraftKings, FanDuel, and Luno. Please visit this page to learn more about how GeoComply's products and services can alleviate your KYC / Fraud / AML challenges in the Brazil market.

FORWARD-LOOKING STATEMENTS

This news release contains "forward-looking information" which may include, but is not limited to, ‎information with respect to the activities, events or developments that the Company expects or anticipates ‎will or may occur in the future. Such forward-looking information is often, but not always, identified by the ‎use of words and phrases such as "plans," "expects," "is expected," "budget," "scheduled," "estimates," ‎‎"forecasts," "intends," "anticipates," or "believes" or variations (including negative variations) of such words ‎and phrases, or state that certain actions, events or results "may," "could," "would," "might" or "will" be ‎taken, occur or be achieved. Such forward-looking information includes, among other things, information ‎regarding: the Company's expectations regarding its ability to complete, and the anticipated results of, the ‎Transaction, statements and information concerning the anticipated benefits of the completion of the Transaction, the anticipated timing for completion of the Transaction, the Net Proceeds that will be available to the Company upon completion of the Transaction, the anticipated quantum of the Obligations, the anticipated quantum of the Distribution per Company Share, the net cash the Company expects to retain upon completion of the Distribution, the Company's ability to obtain Shareholder approval of the Transaction, ‎the anticipated timing of the Meeting, the completion of the Pre-Acquisition Reorganization, and the parties' ability to satisfy closing conditions and receive ‎necessary approvals. Various assumptions or factors are typically applied in drawing conclusions or making ‎the forecasts or projections set out in forward-looking information. Those assumptions and factors are ‎based on information currently available to the Company. Although such statements are based on ‎ assumptions management considers reasonable, there can be no assurance: (i) that the Transaction will be ‎completed; (ii) if the Transaction is completed, that it will be completed on the terms described above; (iii) that the proposed Distribution will be made; or (iv) if the proposed Distribution is made, as to the amount or terms of such Distribution.

Forward-Looking information contained in this news release is based on certain factors and assumptions ‎regarding, among other things, the receipt of all necessary approvals and ‎satisfaction of other conditions to the completion of the Transaction and other similar matters. While the ‎Company considers these assumptions to be reasonable based on information currently available to it, they ‎may prove to be incorrect. Forward-Looking information involves known and unknown risks, uncertainties ‎and other risk factors which may cause the actual results, performance or achievements to be materially ‎different from any future results, performance or achievements expressed or implied by the forward-looking ‎information. Such risks include risks that the Transaction does not close on the anticipated timeline, or at ‎all, risks related to increased competition and current global financial conditions, access and supply risks, ‎reliance on key personnel, operational risks, regulatory risks, capitalization and liquidity risks, the occurrence of any event, change or other circumstances that could give rise to the termination of the Stock Purchase Agreement, ‎risks that a closing condition to the Transaction may not be satisfied, risks relating to the potential failure to receive all requisite shareholder and regulatory approvals, and potential legal proceedings relating to the proposed Transaction and the outcome of any such legal proceeding. ‎Although the Company has attempted to identify important factors that could cause actual results to differ ‎materially from those contained in forward-looking information, there may be other factors that cause results ‎not to be as anticipated, estimated or intended. There can be no assurance that such information will prove ‎to be accurate, as actual results and future events could differ materially from those anticipated in such ‎statements. Accordingly, readers should not place undue reliance on forward-looking information. The ‎Company undertakes no obligation, except as otherwise required by law, to update these forward-looking ‎statements if management's beliefs, estimates or opinions, or other factors change.‎

Investors are cautioned that, except as disclosed in the Circular and in the Stock Purchase Agreement itself, copies of each of which are or will be filed under the Company's profile at www.sedarplus.ca, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon.

The TSX has not reviewed and does not accept responsibility for the adequacy or ‎accuracy of the content of this news release.‎

For further information, please contact FANS' Shareholder Communications Advisor:

Laurel Hill Advisory Group
North American Toll-Free: 1-877-452-7184
Calls Outside North America: 1-416-304-0211
Email: assistance@laurelhill.com

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/214572