GameSquare Esports to acquire Reciprocity Corp.

GameSquare Esports to acquire Reciprocity Corp.

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

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