On January 24th, Modern Times Group announced that it had agreed to sell ESL Gaming to Savvy Gaming Group for $1.05 billion. MTG said it is expecting roughly $875 million in net proceeds from the deal thanks to the organization's 91.46% stake in ESL Gaming.

This deal means that Savvy will acquire and merge Faceit with ESL Gaming, the largest independent gaming organization in the world, to create the ESL Faceit Group. This transaction will reportedly close during Q2 2022.

"MTG has a long history of identifying successful companies and leveraging talented teams to create shareholder value, including backing them with additional capital," said Modern Times Group's CEO, Maria Redin. "We embarked on a process to review our options and the transaction announced today is the culmination of that process and represents an exceptional crystallization of value for MTG's shareholders. The merger with Faceit will also enable the new company to bring gamers a wide range of new services and products."

This new business intends to offer gamers the ability to build competitive esports communities. The organization also aims to be a key platform for partners looking to grow their audiences.

The Profit's Take:

This is a huge deal. I mean, not as big as the Activision-Blizzard acquisition, but still, a huge deal. A report from 2019 said that ESL Gaming did about $36 million in revenue that year. The billion dollar price tag imputes a 27x multiple of their 2019 revenue. I wouldn't call that a crazy valuation. Arguably, ESL and FACEIT are two of the biggest tournament providers in a growing market. The challenge of this sector is an explosion of new players and eventually margin erosion as a consequence. The size of this combined entity could help to combat that erosion and generate more growth over time. The public shareholders seem to agree with the price that was paid. You could make the case that this deal is reasonable another way. When you own these two large tournament providers, it means you could also be the biggest esports betting provider in town. When you're managing a trillion dollars, $1.5 billion is not actually that much. Maybe this could be the first in a series of many moves that aim to bring gaming to Saudi Arabia in a big way. I would not be surprised to see a much larger investment coming from there soon. This is clearly a location play to bring esports to the region, and they are going to do it big! Saudi Arabia is about to become a serious player in the gaming world. I love what's going on in the MENA region around gaming and esports. There is not enough attention being given to this part of the world.

(All information was provided by Pocketgamer.biz and Reuters)