Tag Archives: EG7

Enad Global 7 Completes the Deal to Buy Daybreak

At the beginning of the month we learned that the Swedish company Enad Global 7 (EG7) was planning to purchase Daybreak Game Company.  The deal was expected to close by December 31st.

Enad Global 7

Following that announcement, EG7 made a public presentation to its shareholders that disclosed more information about Daybreak and its games than we had previously known, including:

  • DC Universe Online has the company’s highest revenue and player count
  • EverQuest is the most profitable title
  • They still have rights to make a Marvel game
  • They own Lord of the Rings Online and Dungeons & Dragons Online through Standing Stone Games

There are a lot of spicy details in that post I linked and more in the presentation.

Yesterday EG7 announced that the deal to acquire Daybreak had been completed:

COMPLETION OF THE ACQUISITION OF DAYBREAK GAME COMPANY

The upfront consideration which has been paid for 100 percent of the shares in Daybreak amounts to USD 260 million, equivalent of approximately SEK 2,205 million, on a cash- and debt- free basis (the “Upfront Consideration“). The Upfront Consideration is comprised of the Cash Consideration and the Consideration Shares.

The value of the Consideration Shares amounts to USD 100 million, corresponding to approximately SEK 848 million and 10,079,981 shares in EG7. The price per EG7 share is based on a based on a volume weighted average price of the EG7 share on Nasdaq First North Growth Market for the ten consecutive trading days preceding 1 December 2020 equal to SEK 84.14 per share. The Cash Consideration of approximately USD 160 million, equivalent of approximately SEK 1,357 million, has been paid in cash and is financed through available funds raised via the directed share issue announced on 1 December 2020.

In addition, EG7 will pay the deferred consideration to the sellers of Daybreak of USD 40 million following finalization of Daybreak’s FY 2020 financial statements. The deferred consideration will be paid in cash.

On 2 December 2020, the board of directors resolved to issue the Consideration Shares, subject to the approval from the extra general meeting on 17 December 2020. The extra general meeting approved the share issue and the board of directors has today resolved to allot the Consideration Shares as part of the completion of the Transaction. The issue of the Consideration Shares results in a dilution of approximately 13.2 percent of the number of shares and votes in the Company after the Transaction, through an increase in the number of outstanding shares by 10,079,981, from 66,550,378 to 76,630,359. The share capital will increase by SEK 403,199.40 from SEK 2,662,015.12 to SEK 3,065,214.36.

EG7’s and Daybreak’s financial reporting will be consolidated from 22 December 2020.

For further information about the acquisition of Daybreak, please refer to the previous press release published on 1 December 2020.

As the deal was for both cash and shares in EG7, the Daybreak shareholders will now own some of EG7.

Following the Transaction, Daybreak’s former main owner Jason Epstein will hold approximately 10 percent and the other former shareholders of Daybreak will together hold approximately 3 percent of the total number of outstanding shares and votes in EG7.

So we’re not rid of Jason Epstein yet I suppose.

The EG7 board had approved an increase in the number of outstanding shares in the company, as announced in a press release last week, in order to fund the acquisition.

While the position of EG7 has been quite positive about Daybreak and its titles… or most of them anyway… we will likely have to wait until well into the new year to find out what impact the sale will have.

Daybreak Revealed in Enad Global 7 Presentation

As I mentioned yesterday, we did not know much about Daybreak Game Company over its close to six years of existence.  It was a privately held firm and was reluctant to be straight with outsiders as to who even owned the company.  And before that, when it was SOE, its details were hidden within a giant conglomerate where it was such a small piece of the pie that it did not even get its own line item.

So having Daybreak purchased by a small public company, where it will be a large part of the pie and which needs to disclose details to the public means that we’re learning more about the company this week than we have known for ages.  Roll on Enad Global 7.

Enad Global 7

Yesterday’s press release about the acquisition gave us some fresh information and confirmed things we suspected, like the fact that Daybreak owned Standing Stone Games.  But there is more to be seen.  Over on their investor relations page you will find a presentation by EG7 about the state of Daybreak and its games that is stunning in its clarity after all these years.

It is so meaty that I downloaded it immediately lest it be posted in error and disappear.

The presentation starts by introducing EG7’s strategy and execution of their plan so far, which is an interesting read showing their acquisition pace up to this point.  And then there is the About Daybreak section, which starts with a nicely summarized history of the company.

Page 12 – a Brief History of SOE/Daybreak

Just enough detail I think.  A few side ventures are missing, and there is a whole book to be written about the strange path of H1Z1 over the last five years, but otherwise the basics are laid out.

They mention the licensed IPs the company has, as well as the valuable IPs Daybreak has created.

Page 14 – Valuable home grown IPs

EverQuest has booked about a billion dollars in revenue over its life.  Not bad.  A lot of games never come close to that number or 21 years of longevity.  The H1Z1 notes are a bit sad… inspired actually successful titles.  Sad enough that they stop mentioning H1Z1 after that.  And I still have a retort to that PlanetSide 2 world record which was a planned event and not any sort of organic player surge.

Cool stuff so far.  And then we get the real dirt!  Actual numbers about earnings and players.

Page 15 – Year to Date numbers as of Sep. 30, 2020

There are some surprises there, though not many.  We had been told that EverQuest was still pretty strong and it was implied that it was doing better than EverQuest II.  But now we know where EQII ranks in the overall lineup, which I guess is ahead of H1Z1, which doesn’t even get a mention.

And then there is DC Universe Online.  Smed, back in the day, told us that it was the top free to play game on PlayStation, and I guess it has held on to a solid base of players.  But if you want that all in chart form, there is a page for that.

Page 16 – Revenue and Earnings compared YTD through Sep. 30 2020

DC Universe Online has the highest revenues, but when it comes to earnings after expenses EverQuest is out in front.  That’s the joke.  A 21 year old game brings home the bacon.

Years ago Michael Zenke had been to SOE and was asking them about why they kept on with EverQuest when you could argue that EverQuest II was a better, or at least more up to date game.  He told me that EQ was so cheap to run that it was going to be profitable to keep going for a long, long time.  And here we are.

That DCUO isn’t at the top of the earnings is likely an indication that it remains strongest on the PlayStation, where it has to give Sony a cut of the revenue from the cash shop.

The presentation digs into further detail.  While the games still attract new players, a majority of the player base has been playing their game of choice for more than three years.

On the money front, the average monthly revenue per paying user for 2020 so far looks pretty strong.

Page 17 – ARPPU YTD through Sep. 30, 2020

Some whales out there spending money.  Of course, that is just the count among users that pay, and the conversion to paying user is important.

Page 17 – Payer conversion rate – YTD through Sep. 30, 2020

For EQ and EQII that probably translates largely to subscribers through the All Access program.  EQ just beats EQII on revenue because it has a lot more players.  Likewise, DCUO has the most players by far, so even at a much smaller conversion rate it makes more money.

I think the lesson here is more players is better if you want to survive.

The presentation also has some plans for the future.  They want to do an upgrade for DCUO to make it look and play better on the new generation of consoles by this time next year.  They also want to spruce up LOTRO as they see a possible boon in Amazon’s upcoming Lord of the Rings TV series.  There is even an unannounced new project.  Maybe it is related to the Marvel IP license Daybreak apparently holds.

The plans and view of the combined company are something as well.  As far as revenue goes, EG7 buying Daybreak pretty much doubles the size of the company in staff and revenue.

Page 27 – YTD revenue for EG7 groups

That is a big bite.  Daybreak’s ongoing success will very much influence EG7’s success.  They aren’t buying the company to neglect it.

While the era of the Jason Epstein Daybreak will end on December 31st, Daybreak will continue to exist as an entity withing EG7.  Within the corporate structure the Daybreak stuff will have its own area.

Page 28 – The Daybreak Structure

I am curious as to whether or not that was the actual structure within Daybreak today simply being grafted on to the EG7 tree.  I know Jen Chan let slip at one point about working with the SSG team on some things. (No location for Cold Iron Studios on that chart though, so no idea still if it was part of the sale and too small to mention, was folded in with Dimensional Ink due to the Cryptic background of both groups, or was retained by Jason Epstein.)

As for why keep that structure, that is certainly the best plan for the short term.  When you have an asset that needs to keep performing you do not introduce chaos as your first step in integrating.  Things will likely change over time.

Daybreak itself will likely remain a legal entity for a long time.  Having been through many mergers and acquisitions over the last 30 years… on average that has happened in a way that involved me directly about every three years over that time… there are a lot of reasons to not simply dissolve a corporate entity.  There are a lot of contracts and agreements made in the name of that company that have to be transferred over time, and the other side of the agreement doesn’t care about the change.  So you wait until a contract comes up for renewal and then you transfer it to the new owning company.  That can easily take a decade to work itself out.

And Daybreak, for all its foibles over the last six years, remains the unifying identity for the teams under it.  That is who they are in the EG7 ecosystem.

Page 24 – EG7’s world wide organization

That big owlbear eye that is the Daybreak logo will be looking out at us for a while longer.

Related posts:

Daybreak to be Acquired by Enad Global 7

Enad Global 7 (EG7) announced in a press release earlier today that would be purchasing Daybreak Game Company for $300 million in a structured payout deal. ($260 million up front, $100 million in shares and $160 million in cash, plus another $40 million in cash if Daybreak makes its projected 2020 numbers.)  A bunch of news items have popped up about this today and I will link to them and other reactions at the end of the post.

Enad Global 7

That will get them the following games according to the press release:

  • EverQuest
  • EverQuest II
  • H1Z1
  • PlanetSide 2
  • DC Universe Online
  • Lord of the Rings Online
  • Dungeons & Dragons Online

Not mentioned was Cold Iron Studios, which Daybreak was said to have acquired back in August.  But maybe that was Jason Epstein or Columbus Nova who actually bought it.

And I am not really kidding with that.  The nearly six year history of Daybreak has not been characterized by a close relationship with the truth when it came to the business, so a surprise twist or a revision of history would be right in line with past behavior.  Even now we’re just finally getting confirmation that Standing Stone Games was owned by Daybreak… or Jason… or Columbus Nova… after being told that Daybreak was merely going to be SSG’s “publisher.”  So I guess EG7 is buying Standing Stone Games as well.

The press release is also interesting as it lists out some of the Daybreak financials that were part of its due diligence.  We could barely find numbers about the company when it was part of Sony and never saw a thing since it was Daybreak.  For example, Daybreak has 178 million registered users of its games.  I’m sure they’re not all active, but that database alone has some value.

Anyway, the first question to leap to mind for me was, “Who the hell is EG7?”

The press release echoes the info on their web site which says:

EG7 is a group of companies within the gaming industry that develops, markets, publishes and distributes PC, console and mobile games to the global gaming market. The company employs 170+ game developers and develops its own original IP:s, as well as act as consultants to other publishers around the world through its game development divisions Toadman Studios, Big Blue Bubble and Antimatter Games. In addition, the group’s marketing department Petrol has contributed to the release of 1,500+ titles, of which many are world famous brands such as Call of Duty, Destiny, Dark Souls and Rage. The group’s publishing and distribution department Sold Out holds expertise in both physical and digital publishing and has previously worked with Team 17, Rebellion and Frontier Developments. The Group is headquartered in Stockholm with approximately 270 employees in 10 offices worldwide.

So, a Swedish company, something confirmed over at Bloomberg, without much more to add, though their summary is much more succinct:

Enad Global 7 AB operates as a game development studio. The Company develops, markets, publishes, and distributes PC, console, and mobile games. Enad Global 7 serves customers worldwide.

The company, founded in 2013, says it is a game developer and has very recently purchased a few small studios, but its biggest claim to fame seems to be that its marketing department has helped out with some famous brands, likely just for the Swedish market if I were to make a guess. (Though their online presence is pretty week. They discovered Twitter just this year.)  And now they’ll have a bag of MMORPGs to play with.

As for what it will mean for the games and employees of Daybreak, that remains to be seen.  The press release has the usual rosy optimism in its quotes, as all such press releases do.

I am thrilled to be welcoming Daybreak into the EG7 family today. Daybreak is a studio I have the utmost admiration for, not only for their games but the teams behind those games and services. Together we have bold and exciting plans for the future, and I look forward to making those dreams a reality for gamers all over the world.

Robin Flodin, CEO and Co-founder of EG7

This could be a boon for the company, or they could get the Gamigo treatment like Trion did when they were acquired.  Or EG7 might just want the data for the 178 million registered Daybreak users for marketing purposes… that actually gets a mention in the press release. (Bad news for them, at least three of those users are just me.)

But that will all come later.

We’re still in the phase where the deal isn’t done yet and both sides of the transaction are invested in keeping to the status quo going.  Expansions for EverQuest and EverQuest II will launch this month (Dec. 8th and 15th respectively, the latter being announced today along with the acquisition).  Updates will keep coming out.  Nobody is going to lose their job just yet.

But the deal is expected to close by December 31, 2020, so the real situation likely won’t become apparent until next year.  Some people will no doubt be redundant and get laid off.  Plans may change.  And maybe the individual studios that Daybreak created earlier this year will end up being used to distinguish the groups.  But come the new year Daybreak, announced back in February of 2015, will likely cease to be a thing.

Related posts (Those with info beyond the press release marked*):