Press releases

22.01.2018

Mail.Ru Group Limited acquisition of 100% of ESforce

Mail.Ru Group Limited (MAIL.IL, hereinafter referred as "the Company" or "the Group"), one of the largest Internet companies in the Russian-speaking Internet market, today announces the signing of the acquisition of 100% of ESforce, one of the largest eSports company globally.

The transaction was signed on 19 January 2018 is expected to close in Q1 2018 and is subject to third party approvals.

Mail.Ru Group will acquire 100% of ESforce in an all cash transaction. The purchase price will be $100m less any outstanding debt at closing, with a further KPI related payment at the end of 2018 connected to specific financial and operating targets. The further payment is likely to be around $20m. Mail.Ru Group will fully consolidate ESforce and will disclose all results on a pro-forma basis going forward to allow like-for-like comparison.

Mail.ru is acquiring the business from Anton Cherepennikov and from Highland Falls Investment. Vladimir Streshinskiy has abstained from voting as an interested director. An independent committee of the board was formed to oversee the acquisition process and to advise non-interested directors. The committee received third party assessments from both Deloitte and Morgan Stanley. The transaction has been approved by all non-interested and independent directors.

The eSports market continues to see very fast growth and in 2018 Superdata estimate the global market will be around $1.6bn with around 300m users. ESforce is one of the largest ESports companies in the world, and is the largest in Russia and eastern Europe. The company has, over the last few years, built a full ecosystem where it occupies a leading position in almost all of the critical industry segments:

• Ownership of two world-class clubs: Virtus Pro and SK. Between them they have won 258 gold, 190 silver and 173 bronze total medals in international tournaments.

• Epic eSports Events, organizing EPICENTER and a series of tournaments among world’s strongest eSports teams in Dota 2 and CS:GO.

• 14 websites, 209 social media groups and video production studios creating live streams and attracting over 82M of annual unique users.

• Media Cybersport,ru and Cybersport.com, which include CyberBase, the largest database in global eSports industry covering majority of tournaments, clubs, teams and individual players.

• Yota Arena in Moscow, one of the world’s largest eSports tournament venues of over 5,000 m2 and over 1,000 seats.

• Trading and analytics platforms for CS:GO and Dota2 players and eSports fans.

• eSports’ merchandising retailer Fragstore, present in 20 countries (12 in Europe).

In 2017 the business had 116m users, 440m sessions and over 120m hours watched of online content via streaming platforms. 2017 revenues are expected to be around $19m which was around 150% growth on

the year before. USD and EUR revenue accounted for around 60% of total revenues with ads and rewards making up almost 80% of revenues with the balance from merchandising, events and content. In order to drive the very strong growth of the business there has been significant investment over the last few years with around $60m of funding to date. This is now largely completed. In 2017 the business had negative EBITDA estimated at $15m.

With the bulk of the fixed investment now undertaken, and the business continuing to scale we would expect to see ESforce revenue growth of between 80-100% in 2018 and the losses halving before the business moves into profitability at the end of this year.

Commenting on the acquisition Mail.Ru Group CEO (Russia) Boris Dobrodeev said:

“The global eSports business continues to experience exceptional growth is forecast by some to overtake the traditional sports market over the next decade. ESforce is one of the global leaders and has built a dominant presence in all of the key verticals. We are very pleased that the talented team who have been responsible for building this business will all be remaining with the business. The very obvious strategic fit with Mail.Ru Group needs little explanation and we will be looking to leverage our unrivalled position inside of the social networks and gaming in order to drive ESforce to even greater success. We are very excited by this acquisition and believe it fits well with all of our key strategic priorities.”

Notes to announcement:

ESforce's revenue and EBITDA numbers presented herein are prepared based on principles used for the segment financial information of the Company's consolidated operations, i.e. do not include certain adjustments which would be required under IFRS. The accounting principles used in segment financial reporting are described in more detail in the Company's prior announcements.