SEED Innovations Ltd (AIM:SEED, OTC:FFRIF) said it expects to receive €5.9mln (£4.8mln) of cash over two years from the takeover of portfolio company Leap Gaming by IMG Arena US.
IMG Arena, which is the sport-betting data insights business of IMG, owned by Endeavour Group (NYSE:EDR), has agreed to buy Leap Gaming, also known as Fralis, based on a enterprise valuation of €14mln.
This is calculated to result in an equity value for Leap of roughly €12.9mln.
SEED’s stake of 43.75% of the Israeli gaming applications developer is expected to see it receive around €5.6mln, with €2.8mln on completion of the deal and with up to €2.8mln subject to any claims under customary warranties and indemnities, on the 12-month anniversary of completion.
On completion, SEED will also receive repayment of its €250,000 term loan plus accrued interest.
With completion requiring regulatory approvals in the UK, Malta and other jurisdictions, Leap and IMG estimate the deal will complete in March of April next year.
SEED said it intends to use the proceeds for making further investments in accordance with its investing policy, which is focused primarily on medical cannabis businesses.
As such, SEED chief executive Ed McDermott said: “The opportunity to divest our interest in Leap, which is increasingly anomalous with the rest of our portfolio, for cash, is prudent given the continuing challenging market conditions which make a successful public market listing for Leap in the short to medium term unlikely.
“It is not the exit we envisaged but provides liquidity and enables SEED to continue to refocus our investment portfolio whilst at the same time setting Leap up for further success in the future.”
He said the cash will come at a good time for SEED, providing it with funds to invest in disruptive technologies in the life sciences, biotech, health and wellness industries (including medical cannabis) where most of it current investments sit and where the expertise of its board lies.
“We are optimistic that this investment focus has the potential to enhance long-term value creation," said McDermott.