- GameSquare (TSXV:GAME) will purchase legendary gaming brand FaZe Clan in an arm’s length all-stock transaction
- The combined companies will serve the largest audience in gaming with more than 1 billion social followers
- GameSquare Holdings is a vertically integrated digital media, entertainment and technology company
- GameSquare stock (TSXV:GAME) last traded at C$2.25 per share
- FaZe Holdings (NDAQ:FAZE) last traded at US$0.1834 per share and has lost 95.33 per cent over the past year
GameSquare (TSXV:GAME) will purchase legendary gaming brand FaZe Clan in an arm’s-length, all-stock transaction.
FaZe Clan, trading as FaZe Holdings (NDAQ:FAZE), is one of the world’s most prominent gaming organizations with more than 500 million followers across social platforms. The company’s talent roster spans gamers, streamers, content creators and esports professionals, and includes more than 10 competitive esports teams with more than 40 world championships to date.
GameSquare and FaZe Clan will serve the largest audience in gaming with more than 1 billion social followers, with a core focus on audiences in the 13-34 demographic and backing from brand partners including Porsche, Nike, Jack in the Box, Xfinity, Miller Lite, H-E-B and GHOST.
Combined, the companies generated revenue of approximately $138 million and achieved a 26.3 per cent gross margin in 2022. GameSquare management expects to realize more than $18 million in run-rate cost savings from the acquisition, catalyzed by reduced duplicate corporate costs and other cost savings.
Transaction rationale
GameSquare views the acquisition as in line with its strategy of onboarding “leading companies focused on esports, gaming and youth culture to increase capabilities, grow scale, unlock cost savings, empower fans and creators and drive value for shareholders,” according to Friday’s news release. The company intends to unlock this growth by:
- Refreshing the FaZe Clan brand through re-engagement with core fans, creators and their communities. Hiring FaZe Clan’s founders as CEO, president and COO is a key part of this plan
- Leveraging the companies’ combined creator network in gaming and esports with more than 250 million hours of content watched in 2022. Talent includes Ninja, TimTheTatman, Max Holloway, Trevon Diggs, FaZe Banks, FaZe Temperrr, FaZe Apex, FaZe Nickmercs, FaZe Rug, FaZe Swagg and more
Key financial and operational details
The merger requires the conversion of each FaZe Clan share into the right to receive 0.13091 shares of GameSquare common stock. Upon closing, this means GameSquare shareholders will own 55 per cent of the combined company, with FaZe Clan shareholders owning 45 per cent.
To close the deal, GameSquare must also complete a $10 million private placement, which is being backstopped by Goff & Jones Lending should it fall short on the raise, as well as sign a three-year asset-based loan facility agreement with SLR Digital Finance of not less than $10 million.
Upon closing, FaZe Clan will become a wholly owned and independent GameSquare subsidiary, and GameSquare’s board will be composed of nine directors, with six chosen by GameSquare, two by FaZe Clan and one to be mutually agreed by GameSquare and FaZe Clan.
“The gaming community represents one of the largest and most engaged segments of the attention economy,” Justin Kenna, CEO of GameSquare, said in a statement. “The acquisition of one of the biggest names in gaming serves as a perfect illustration of how we have built a powerful infrastructure with expansive scale that we can use to leverage the full spectrum of resources within the GameSquare ecosystem. We are also thrilled to welcome back the founders of FaZe Clan and their fans, one of the most deeply engaged communities born on the internet.”
“I’m confident that with Tommy, Apex and me back in charge of the brand, FaZe Clan will get back to where it was in its peak years,” added Richard “FaZe Banks” Bengtson, who will become CEO of FaZe Clan upon closing. “We grew up on the internet and understand this brand better than anyone ever could. We are grateful to have found a partner in GameSquare who sees that value in us and can help execute our vision. We’re going to produce first, talk later.”
The transaction is currently anticipated to close in Q4 2023. The combined company will then issue new guidance to shareholders.
GameSquare Holdings is a vertically integrated digital media, entertainment and technology company. Its brands include GCN, Cut+Sew (Zoned), Code Red Esports, Complexity Gaming, Fourth Frame Studios, Mission Supply, Frankly Media, Stream Hatchet and Sideqik.
GameSquare stock (TSXV:GAME) last traded at C$2.25 per share. The stock has fallen by 42.60 per cent over the past year.
FaZe Holdings (NDAQ:FAZE) last traded at US$0.1834 per share. The stock is down by 95.33 per cent over the past year.
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