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Huuuge plots M&A drive with IPO proceeds

| By Daniel O'Boyle
Social games developer Huuuge intends to use the proceeds of its IPO to acquire other social game developers, and has already identified about 60 possible targets.
Finance growth

This was revealed in the prospectus document for the developer’s Warsaw Stock Exchange offering, which has been approved by Poland’s Financial Supervision Authority (KNF).

The IPO will be made up of a public subscription for up to 15,000,000 newly issued shares and a public sale of up to 18,350,000 existing shares.

Based on the PLN50 (£9.71/€11.00/$13.33) price, this means it could raise more than PLN1.5bn, making the offering the largest IPO of a gaming company in the history of the Warsaw Stock Exchange.

The existing shares will be those held by investors in the business, including Big Bets OÜ, which is owned by company founder Anton Gauffin and holds 42% of Huuuge shares.

However, the business noted that Gauffin intends to retain a “significant” shareholding.

The newly issued shares are expected to generate about PLN 565m, or $150m, in gross proceeds.

Of this total, about 90-95% will be used for “extraordinary growth events” such as mergers and acquisitions. It is hoping to target established studios with both “compelling return on advertising spend” and potential for further growth and valued between $20m and $300m.

The developer has already identified around 60 possible acquisition targets.

The IPO will begin with a book-building from today (27 January) until 4 February. Huuuge will then accept share subscriptions from 5 February to 9 February and anticipates that it will list on the exchange on around 19 February.

In the prospectus, the business also reported 2019 revenue of $259.4m, up 12.1% from the previous year.

While it could not yet report its 2020 revenue, it appears set to easily surpass 2019’s total, as Huuuge brought in $244m in the first three quarters of the year, 30% more than in 2019.

Its earnings before interest, tax, depreciation and amortisation (EBITDA), meanwhile, came to $24.8m in 2019, up 147%. This is also set to rise dramatically in 2020, totalling $54.2m for the first nine months of the year.

In terms of operating profit, Huuuge made $14.2m in 2019, up 47% from 2018. In the first 9 months of 2020, it drastically exceeded this total, with $50.1m.

Its net profit, meanwhile, came to $4.3m in 2019, 48.2% more than it had been in 2018, while this figure came to $24.8m for the first nine months of 2020.

A major reason for the increases in revenue and earnings was a growth in daily active users, from 851,000 in 2018 to 911,000 in 2019 and 965,000 through the first nine months of 2020.

Its monthly active users, meanwhile, grew to 4.0m in 2019 and 4.7m to the end of September 2020.

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