Virtual Gaming Worlds (VGW) founder Laurance Escalante is poised to achieve complete ownership of the company following a decisive shareholder vote in favor of his proposal to acquire the 30% of shares he does not already own, thereby valuing the company at A$3.2 billion ($2.1 billion).
This move will transition the company into a private entity, a transition Escalante believes will better equip VGW to navigate various challenges, including regulatory scrutiny in the US.
During the shareholder assembly on August 1, an impressive 85.04% of attending shareholders (which amounts to 91.31% of all minority shareholders) supported Escalante’s purchase offer priced at A$5.05 per share.
The deal is pending court approval, anticipated by August 5. Should approval be granted, the agreement is set to take effect on August 6, with finalization scheduled for August 20.
Escalante plans to carry out the acquisition through Ocean BidCo Limited, a special purpose entity incorporated in Guernsey. Minority shareholders are presented with the option to receive cash, shares in Ocean BidCo, or a mix of the two.
### The End of a Turbulent Relationship
Escalante’s complete acquisition signals the termination of a prolonged and often contentious interaction with minority investors.
Recent months have seen heightened tensions, marked notably by an incident where Escalante, in a profanity-laden outburst, challenged disgruntled investors to sell their shares if they doubted his leadership.
This confrontation was preceded by investor concerns regarding undervaluation, lack of governance transparency, and VGW’s handling of regulatory pressures in the US.
Furthermore, investors have expressed unease regarding Escalante’s engagement with competing social gaming platform Kickr Games, citing potential conflicts of interest with VGW’s own brands.
Despite these frictions, Escalante’s offer of A$5.05 per share aligns with valuation ranges estimated by independent advisory firm Kroll Australia, which pegged the company’s worth between A$4.53 and A$5.63 per share.
This offer notably exceeds Escalante’s initial bid in November 2024, which was priced between A$3.50 and $4 per share and subsequently rejected by an Independent Board Committee appointed by VGW’s board.
### Escalante Claims Going Private Will Aid Growth
Escalante contends that privatization will afford VGW increased operational flexibility and reduce distractions related to shareholder demands. Registering Ocean BidCo in Guernsey, a known tax haven, exempts VGW from the obligation to file financial reports in Australia, potentially enhancing cost efficiencies.
Despite these changes, Escalante has affirmed his commitment to maintaining an Australian tax-paying entity and keeping the company’s domicile within the country.
VGW has demonstrated strong financial performance recently. In FY2024, it reported revenues of A$6.1 billion, up 27% year-on-year, and a net profit of A$491.6 million, reflecting a 33% increase. The company anticipates profits ranging from A$555 million to A$570 million in FY2025, despite expected downturns due to withdrawals from several US states.
### Could Privatization Alleviate US Regulatory Pressures?
VGW has achieved significant growth, yet it faces considerable challenges in the US, one of its primary markets. The company’s dual-currency sweepstakes model has encountered increasing legislative and regulatory obstacles. Recently, VGW announced its withdrawal from states such as Mississippi and New Jersey, raising the total number of states from which it has exited to 11.
Out of these, seven exits occurred within the past year. Legislative changes and regulatory actions in states like New York, Nevada, and Louisiana have forced the company to cease operations in those regions in recent times.
Despite not operating in states like Idaho, Michigan, Montana, or Washington, VGW must also contend with looming regulatory threats in Maryland and West Virginia, in addition to legal challenges in Alabama.
Privatization might shield VGW from the need to disclose sensitive information publicly, potentially easing the handling of such threats, yet the company’s heavy reliance on the US market continues to pose significant risks.