TORONTO: GameSquare Esports Inc., a Canadian gaming and esports company, has signed an arrangement agreement dated December 31, 2020 to acquire 100% of the issued and outstanding shares of Reciprocity Corp., a privately held gaming and esports company.
Under the terms of the Agreement, GameSquare will issue 43.75 million common shares of GameSquare at a deemed price of C$0.33 per share to certain securityholders of Reciprocity.
Certain Reciprocity securityholders will also be entitled to receive 5.3 million GameSquare common shares if the Reciprocity business generates a minimum of US$5 million of revenue and US$1 million of EBITDA within 12 months of closing of the acquisition and 9 million Common Shares if the Reciprocity business generates a minimum of US$7 million of revenue and US$1.4 million of EBITDA within 12 months.
The Consideration Shares shall be subject to a 12-month lock-up period, a third of which will be released every four months following Closing.
In addition, in connection with the Acquisition, the Company has also agreed to grant (i) 3 million replacement options to certain Reciprocity optionholders exercisable for 24 months to acquire an equal number of Common Shares at an exercise price of C$0.40 per option and (ii) 6,168,000 options to certain Reciprocity securityholders exercisable for 24 months to acquire an equal number of Common Shares at an exercise price of C$1.00 per option.
As further described in a press release dated November 25, 2020, the combination of GameSquare and Reciprocity is expected to significantly increase the revenue profile of the combined entity and to result in a company that generates positive EBITDA in the twelve months following Closing.
The Company expects to provide more detail relating to the Acquisition in a press release to be issued in early January 2021.The Acquisition is an arm’s length transaction for the purposes of the policies of the Canadian Securities Exchange (CSE) and is being structured as a plan of arrangement.
GameSquare is not paying any finder’s fees in connection with the Acquisition. The Closing is subject to the satisfaction of customary conditions precedent, including, inter alia, applicable shareholder and regulatory approvals, including a final court order of the Ontario Superior Court of Justice (Commercial List), and other closing conditions customarily found in transactions similar to the Acquisition. Closing is expected to occur in early March 2021.
GameSquare Esports Inc. is an international gaming and esports company headquartered in Toronto, Canada. The Company is seeking to acquire additional assets and entities serving the gaming and esports markets and, more broadly, in sports and entertainment. GameSquare’s acquisition of Code Red Inc. (Code Red), an esports talent agency, provided an initial foothold in Europe through its UK operations.
Code Red represents leading on-screen talent, players and influencers and works with leading global brands to develop influencer campaigns and esports marketing strategies.
Reciprocity is a gaming and esports company headquartered in Toronto, Canada and has been operating since 2017. Reciprocity owns three gaming and esports assets: a CrossFire franchise in China that it owns with its partner LGD Gaming, a 40% interest in a League of Legends team that competes in Latin America, and, its wholly owned subsidiary corporation, GCN, Inc., a digital media company focusing on the gaming and esports audience based in Los Angeles, USA