iCandy acquires Flying Sheep Studios establishing its presence in the European gaming market. In the video games area, the European gaming market is expected to be worth USD 27.4 billion in 2021. With its web technology that is size- and speed-efficient with cleaner and neater code, as well as lower server load, Flying Sheep Studios’ in-house HTML5 developer capabilities ensure on-time, high-quality games. HTML5 also features rich media elements, which allow media material to play without the need for a plugin, and is designed for cross-platform usage without the need for downloads or installations.
Over the years, Flying Sheep Studios has developed a wide range of proprietary software to extend HTML5’s capabilities beyond typical 2D technology. Flying Sheep Studios has advanced to the point where it can create games with fluid 3D graphics that rival native apps thanks to its in-house developer tools.
Transaction between iCandy and Flying Sheep Studios
Pursuant to the binding agreement, iCandy Group is investing a total of EUR2 million (AUD3.01 million) in exchange for a 60% interest in Flying Sheep Studios, detailed as follow:
- EUR1.2 million (AUD1.81 million) cash investment into Flying Sheep Studios to subscribe for 37.5% of the enlarged share capital of Flying Sheep Studios, and
- EUR0.8 million (AUD1.21 million) consideration in exchange for 22.5% of Flying Sheep Studios from the Founders of Flying Sheep Studios, to be satisfied as follow:
- cash of EUR400,000 (AUD603,000) (“Cash Consideration”), and
- via the issuance of 4,606,549 new fully paid ordinary shares (“Consideration Shares”) of iCandy Group worth EUR400,000 (AUD603,000), at an issue price of AUD0.131.
- In addition, the Founders of Flying Sheep Studios will collectively be given 500,000 unlisted options (“Options”), to be granted within 15 business days from the Closing Date. Each Option shall grant the right to acquire one iCandy Group share at a strike price of AUD0.125, and shall expire on 5 April 2027.
The Founders will receive the Consideration Shares in 12 equal tranches over the course of three years, with the first tranche being delivered 15 business days after the Closing Date. Due to the Company’s available placement capacity under Listing Rule 7.1, the Consideration Shares and Options are expected to be issued without shareholder approval.
The three (3) Founders of Flying Sheep Studios have each signed a three-year management contract as part of the acquisition agreement to continue to run Flying Sheep Studios after the acquisition. If any of the Founders quits the management contract before the 3-year period, iCandy Group may clawback the Cash Consideration based on the number of months that such Founder(s) have yet to serve, as well as all Consideration Shares that have yet to be given to such Founder(s).
The transaction is expected to occur in the second quarter of 2022 (“Closing Date”), barring any unforeseen circumstances. There are no further conditions antecedent to completion other than the Company completing due diligence on Flying Sheep Studios, and the binding agreement otherwise comprises terms and conditions considered conventional for an agreement of this sort.
The Acquisition Rationale for iCandy
Based on the following reasons, the Company sees the acquisition of Flying Sheep Studios as an opportunity to increase shareholder value.
- Clear synergies and value chain growth
- Addition to the talent base
The acquisition will enable iCandy Group’s entry into metaverse gaming by strengthening the Company’s gaming backend tools and capabilities, particularly with Flying Sheep Studios’ HTML5 technology portfolio.
The merger of Flying Sheep Studio’s seasoned team of developers and software engineers will contribute to iCandy Group’s existing talent pool of over 600. This will also help iCandy Group achieve its goal of being a global AAA metaverse gaming powerhouse. It is currently Australia’s, New Zealand’s, and Southeast Asia’s largest independent game developer.
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