ESE Entertainment Inc. (TSX-V:ESE) said it has entered into a binding share purchase agreement to acquire 100% of the issued and outstanding shares of Auto Simulation Limited T/A Digital Motorsports, an Ireland-based provider of advanced simulation racing infrastructure, technology, and support.
Under the terms of the agreement, ESE will pay C$1,681,250 in cash on the closing of the transaction, subject to a customary working capital adjustment, plus up to 941,500 common shares of the company issuable on closing, and up to 8,473,500 common shares to be released in six equal installments every 6 months, with the first Installment being issuable on December 31, 2021.
The agreement will also contain an earn-out, whereby if Digital Motorsports does not achieve certain revenue-based milestones during the earn-out period (commencing on execution and ending on January 1, 2027), certain of the security-based consideration under the Aareement will be delayed or withheld.
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ESE has also agreed to make an investment of €250,000 in Digital Motorsports on closing to fund its working capital needs.
The co-owners of Digital Motorsports have agreed to continue to run the operations of Digital Motorsports after closing, to ensure continuous business operations and a smooth transfer of Digital Motorsports’ business to the company, and will enter into employment agreements with Digital Motorsports.
Digital Motorsports is an award-winning organization and one of the leading sim racing solutions providers in Europe, specializing in building bespoke simulators and offering turnkey simulator packages. Included in the transaction is Digital Motorsports’ portfolio of intellectual property related to racing simulator solutions, components, and cloud-based racing services. Additionally, Digital Motorsports is currently developing both products and technology to reduce the complexity and barriers to entry in sim racing.
Digital Motorsports has key vendor distribution rights and partnerships in the industry, and they have worked with world champions across multiple disciplines from F1, WEC, WRC, Drifting, and more. Digital Motorsports are a customer-centric business offering a mix of professional products, turnkey solutions, and a world-class esports racing league.
The transaction is intended to build on ESE’s already strong position in the sim racing market and bring it one step closer to becoming one of the largest gaming and esports infrastructure companies in the world.
In a statement, Niall Maher, CEO of Digital Motorsports commented: “Digital Motorsports (DMS) has a proven track record of building world class simulators and hosting the most competitive and professionally run online racing leagues and events. We are very proud to have a 5-star customer service rating, thanks to the trust and support of our online community and the tireless efforts of all our employees who make DMS a truly unique place to work and a recognized leader in esports.
"Over the past 3 years DMS has built a differentiated global brand in the Sim Racing space. With the increasing complexity and advancements of today’s AR/VR Motion Simulators, we believe the demand for turnkey solutions, tier 1 components and professional online racing is poised for years of significant growth. We are extremely excited to now be part of the ESE family and are well positioned to capitalize on this unique opportunity. ESE has the infrastructure, resources, culture, strategy and brand which is aligned to the Digital Motorsports Vision. I firmly believe we have everything in place to be No.1 Globally by bringing game changing new technology, next-generation products and unrivalled professional services to the market and realize continued growth and sustained success into the future,” Maher added.
Konrad Wasiela, CEO of ESE added: “Our vision, shared alongside Niall and his team, is for Digital Motorsports to become the #1 global brand in esports for the motorsport industry. By combining the resources of ESE and Digital Motorsports, we anticipate excellent synergies to be realized for our business. With the execution of this agreement, we are one step closer towards executing our vision.”
Closing of the transaction is subject to customary closing conditions, including TSX Venture Exchange approval.
ESE is a Europe-based entertainment and technology company focused on esports and gaming. ESE’s assets consist of multiple world-class operators in the gaming and esports industries. The company’s capabilities include but are not limited to: physical infrastructure, broadcasting, global distribution for gaming and esports-related content, advertising, sponsorship support, and a growing esports team franchise, K1CK Esports.
The company is focused on bridging the gap between the European, Asian and North American esports industries.
Contact the author at jon.hopkins@proactiveinvestors.com