Orange Capital Ventures

April 20, 2017 10:30 ET

Orange Capital Ventures Announces its Intention to Reject Pollard's Offer to Acquire Innova Gaming for C$2.10 per Share

- 9.8% holder believes Pollard's offer is an implied purchase price multiple of 2.5x 2016 pro-forma EBITDA, materially undervaluing Innova

- Pollard's offer inequitably and disproportionately benefits Pollard's shareholders compared to Innova's shareholders. Since the transaction was announced Pollard's market capitalization has increased by 30%, or C$57.5 million

- Encourages Innova's special committee to run a fulsome strategic review process that will ultimately lead to a sale transaction. If a higher offer from a third party emerges, believes the Innova Special Committee should enter into a definitive sale with a customary break fee to mitigate the Amaya Support Agreement; and

- Believes that holders representing more than 28% of Innova's outstanding shares support Orange Capital Ventures' position that the Pollard offer is too low but that a transaction is in the best interest of shareholders.

NEW YORK, NEW YORK--(Marketwired - April 20, 2017) - Daniel Lewis and Russell Hoffman, collectively Orange Capital Ventures (OCV), owners of approximately 9.8% of the outstanding shares of Innova Gaming Group, Inc. (TSX: IGG) (Innova or the Company), today issued the following statement regarding its investment in Innova:

OCV, a 9.8% shareholder of Innova, does not intend to accept Pollard Banknote Ltd.'s (TSX: PBL) (Pollard) all-cash offer of C$2.10 per share to acquire the Company (the Offer). We believe Pollard's Offer materially undervalues Innova.

We believe that Pollard's Offer inequitably and disproportionately benefits Pollard's shareholders compared to Innova's shareholders. In fact, since the transaction was announced Pollard's market value has increased by 30%, or C$57.5 million, an amount greater than the Offer price for Innova of C$42.6 million.

OCV believes that combining Innova and Pollard would result in substantial cost savings. In 2016, the key management personal and board of directors of Innova earned US$3.4 million. When combining these potential cost savings with the elimination of public company costs and other duplicative functions such as sales and marketing, government relations, and legal and compliance, we believe total annualized cost synergies are likely greater than US$5 million (C$6.7 million) annually. Notably, our assumptions include no revenue synergies from future Innova contracts with Pollard's existing lottery customers.

Innova reported consolidated adjusted EBITDA of US$5.8 million (C$7.8 million) in 2016, or US$4.4 million (C$6.0 million) when eliminating the EBITDA associated with the EBITDA Support Agreement from Amaya, Inc. Adding in the potential cost synergies outlined above, OCV believes that under Pollard's ownership Innova would generate C$12-13 million of annualized recurring EBITDA from long term contracts.

Based on Pollard's Offer of C$42.6 million, less Innova's net cash balance of C$11.2 million (US$8.3 million), the implied value for Innova is an Enterprise Value to pro-forma EBITDA multiple of 2.5x, far below comparable transactions in the lottery and gaming industry. It is no surprise Pollard's shares have reacted well to the proposed Innova Offer.

While it is unfortunate that Amaya, Inc. has entered into a Support Agreement with Pollard at such a low Offer price, we believe the Innova Special Committee is positioned to run a fulsome strategic review process. We urge the Special Committee to communicate with prospective buyers that it is willing to enter into a definitive sale agreement, with a customary break-up fee, to mitigate the Amaya Support Agreement.

Ultimately, OCV believes that a sale of Innova is undeniably in the best interests of all shareholders, and we have communicated this to the Special Committee. We also believe that when combined with our holdings, other major Innova shareholders representing more than 28% of the total shares outstanding support our position that both the Pollard Offer is inadequate and a transaction is the right outcome for all shareholders.

Orange Capital Ventures has engaged Norton Rose Fulbright Canada LLP as its legal advisor in connection with its investment in Innova.

A copy of this press release may be obtained on Innova's SEDAR profile at www.sedar.com.

Contact Information