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Kismet Acquisition One Corporation

Kismet Acquisition One Corporation

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION: Nexters Global

ENTERPRISE VALUE: $1.9 billion
ANTICIPATED SYMBOL: GDEV

Kismet Acquisition One Corporation proposes to combine with Nexters Global Limited (“Nexters” or the “Company”), a Cyprus-based mobile & social game developer and publisher.

Nexters was founded as an independent gaming studio in 2010 by Andrey Fadeev and Boris Gertsovsky, the early pioneers of social and mobile game development in Russia. Based in Cyprus since 2017, Nexters has rapidly grown into a top-5 independent European game developer by net bookings.

The Company’s flagship product is its blockbuster Hero Wars mid-core RPG franchise, played in over 100 countries and available across all key platforms. Hero Wars has delivered 8.5x MAU growth to 5.4 million users and 4x paying users growth in the last two years. The Company is planning to launch three new titles in 2021 in casual genres, leveraging its proven expertise in mobile gaming and digital marketing to engage new audiences and expand its footprint across key global markets. The Company views APAC as a significant expansion opportunity, given Nexters’ expertise in RPG games and the popularity of the genre in Asia.

Nexters has delivered best-in-class profitability and growth, scaling its net bookings 10x in two years to $318 million in 2020, while staying well-diversified across key gaming markets. As of 2020, 35% of the Company’s net bookings came from the United States, 23%2 from Europe, and 19%1 from Asia. The growth is expected to continue throughout 2021-23, with 2023 Net Bookings projected to reach $562 million and Management EBITDA3 expected to come in at $138 million for 2021 and increase to $201 million by 2023.

1 Based on in-game purchases net of platform fees over January – November 2020 (data provided by AppMagic), excluding developers owned by other companies.
2 Excluding Russia/former Soviet Union countries which constitute 14% of 2020 net bookings.

SUBSEQUENT EVENT – 8/12/21 – (LINK)

On August 11, 2021, Kismet and certain of the other relevant parties to the Business Combination Agreement entered into Amendment No. 2 to the Business Combination Agreement (the “Amendment”).

  • The Amendment provides that a certain portion of the Pubco ordinary shares issuable to Everix Investments Limited at the time of closing of the Transactions (the “Everix Deferred Exchange Portion”) will be deferred to form a part of the aggregate amount of 20,000,000 Pubco ordinary shares to be allocated on a deferred basis (the “Deferred Exchange Shares”) upon the occurrence of certain market triggers based on the volume-weighted average share price of Pubco’s publicly traded shares.
    • Accordingly, the Company’s other shareholders will, at the time of closing of the Transactions, receive a greater pro-rata portion of the Pubco ordinary shares, in aggregate equivalent to the Everix Deferred Exchange Portion.
    • The allocation of the Deferred Exchange Shares to be made among the Company’s shareholders, including Everix Investments Limited, upon the fulfillment of the aforementioned market triggers will follow the same pro-rata allocation schedule as the allocation of Pubco ordinary shares to be made at the time of closing of the Transactions.
  • Accordingly, upon consummation of the Transactions, the Company’s largest shareholders, Andrey Fadeev and Boris Gertsovskiy and Everix Investments Limited, will beneficially own an aggregate of approximately 18.1%, 18.1%, and 33.8%, respectively, of outstanding Pubco ordinary shares, assuming none of Kismet’s existing public shareholders exercise their redemption rights.

The Company Shareholders shall be entitled to receive the Deferred Exchange Shares in accordance with, and subject to, the following provisions:

  • 10,000,000 Pubco Ordinary Shares (the “Milestone 1 Deferred Exchange Shares”) if, at any time during the Deferred Exchange Shares Period, the VWAP of the Pubco Ordinary Shares equals or exceeds $13.50 in any twenty (20) trading days within a thirty (30) trading day period on any securities exchange or securities market on which the Pubco Ordinary Shares are then traded.
  • An additional 10,000,000 Pubco Ordinary Shares (the “Milestone 2 Deferred Exchange Shares” and, together with the Milestone 1 Deferred Exchange Shares, the “Deferred Exchange Shares”) if, at any time during the Deferred Exchange Shares Period, the VWAP of the Pubco Ordinary Shares equals or exceeds $17.00 in any twenty (20) trading days within a thirty (30) trading day period on any securities exchange or securities market on which the Pubco Ordinary Shares are then traded
  • The Deferred Exchange Shares issued and delivered to the Company Shareholders, if any, shall be subject to the same restrictions that apply to the Exchange Shares under the Lock-Up Agreements for a period of twelve (12) months expiring on the first anniversary of the date of issue and delivery to the Company Shareholders of such Deferred Exchange Shares.

SUBSEQUENT EVENT – 7/19/21 – (LINK)

On July 17, 2021, Kismet and certain of the other relevant parties to the Business Combination Agreement entered into Amendment No. 1 to the Business Combination Agreement (the “Amendment”).

  • The Amendment, among other things, permits Kismet and Pubco to enter into the Subscription Agreements and consummate the PIPE, provides that the proceeds of the PIPE will count toward the satisfaction of the $100 million minimum cash closing condition contained in the Business Combination, and changes the “Outside Date” for the parties to consummate the Transactions to September 30, 2021.
  • The Amendment also replaces (i) the form of Registration Rights Agreement to be entered into at the Closing with a new form of such agreement, providing for shelf registration rights to certain holders thereunder, and (ii) the form of Sponsor Lock-Up Agreement to be entered into at the Closing with a new form of such agreement, to permit the transfer of certain private placement warrants held by the Sponsor to the Subscribers pursuant to the terms of the Subscription Agreements.

On July 16, 2021, in support of the Transactions, Kismet, Pubco, and the Sponsor entered into separate subscription agreements with certain institutional investors with whom the Sponsor had prior business relationships (each, a “Subscriber”), pursuant to which the Subscribers agreed to subscribe for and purchase an aggregate of 5,000,000 shares of Pubco’s ordinary shares for a purchase price of $10.00 per share for an aggregate commitment of $50,000,000 in a private placement (the “PIPE”) to be consummated substantially concurrently with the closing of the Transactions (the “Closing”).

  • The PIPE is conditioned on the substantially concurrent closing of the Transactions and other customary closing conditions.
  • Also pursuant to the Subscription Agreements, the Sponsor agreed to transfer to the Subscribers, on the date of the Closing immediately after the issuance by Pubco of ordinary shares pursuant to the PIPE, an aggregate of 1,625,000 of the private placement warrants held by the Sponsor.

TRANSACTION

The business combination values Nexters at an enterprise value of $1.9 billion, representing 13.8x projected 2021 and 11.6x projected 2022 Management EBITDA.

The Transaction is expected to deliver up to $150 million in cash to the Company’s balance sheet before advisor fees and/or redemptions by Kismet Acquisition One Corp. current shareholders.

Existing shareholders of Nexters will receive a cash payment of up to $150 million pro-rata to their pre-money shareholdings, and will roll approximately 92% of their holdings into the combined company while agreeing to a 12 month lock-up (subject to certain exceptions).

In addition, the founders and the management will receive 20.0 million Earn-Out shares over 3 years (with 50% of the Earn-Out released at $13.50 VWAP and 50% released at $17.00 VWAP), also subject to a 12 month lock-up.

The Transaction will be funded by approximately $250 million held in trust by Kismet Acquisition One Corp., subject to any redemptions, as well as the additional $50 million investment by the SPAC Sponsor, Kismet Capital Group, via an affiliate.

KSMT transaction overview

PIPE/AMENDED FORWARD PURCHASE AGREEMENT

  • Amends the Forward Purchase Agreement, dated August 5, 2020, between Kismet and the Sponsor by, among other things, increasing the Sponsor’s purchase commitment thereunder from $20 million to $50 million and replacing the Sponsor’s commitment to acquire Kismet’s public units with a commitment to acquire Pubco Ordinary Shares and Pubco Public Warrants in a private placement to occur after, and subject to, the Merger Closing and prior to the Share Acquisition Closing.
  • On July 16, 2021, in support of the Transactions, Kismet, Pubco and the Sponsor entered into separate subscription agreements  with certain institutional investors with whom the Sponsor had prior business relationships (each, a “Subscriber”), pursuant to which the Subscribers agreed to subscribe for and purchase an aggregate of 5,000,000 shares of Pubco’s ordinary shares for a purchase price of $10.00 per share for an aggregate commitment of $50,000,000 in a private placement (the “PIPE”) to be consummated substantially concurrently with the closing of the Transactions (the “Closing”). 
    • The PIPE is conditioned on the substantially concurrent closing of the Transactions and other customary closing conditions.
    • Also pursuant to the Subscription Agreements, the Sponsor agreed to transfer to the Subscribers, on the date of the Closing immediately after the issuance by Pubco of ordinary shares pursuant to the PIPE, an aggregate of 1,625,000 of the private placement warrants held by the Sponsor.

EARNOUT

The issuance of an aggregate of 20,000,000 Exchange Shares (being the Deferred Exchange Shares) to the shareholders of the Company immediately prior to the Share Acquisition Closing (other than Everix Investments Limited) will be deferred as follows:

  • The issuance of 10,000,000 Exchange Shares, in the aggregate, will be deferred until the volume weighted average trading price of the Pubco Ordinary Shares is $13.50 or greater for any 20 trading days within a period of 30 trading days prior to the third anniversary of the Share Acquisition Closing; and
  • The issuance of an additional 10,000,000 Exchange Shares, in the aggregate, will be deferred until the volume weighted average trading price of the Pubco Ordinary Shares is $17.00 or greater for any 20 trading days within a period of 30 trading days prior to the third anniversary of the Share Acquisition Closing.

LOCKUP

  • Three current significant shareholders of the Company will enter into a Lock-Up Agreement with Pubco, and the Sponsor will enter into a separate Lock-Up Agreement with Pubco (collectively, the “Lock-Up Agreements”), pursuant to which:
    • For a period of one year following the Share Acquisition Closing (in the case of the three current significant shareholders of the Company) and for a period of one year following the Merger Closing (in the case of the Sponsor), as applicable, each such holder will not transfer any of such holder’s Pubco securities.

NOTABLE CONDITIONS TO CLOSING

  • By either Kismet or the Company if any of the conditions to closing set forth in the Business Combination Agreement shall not have occurred prior to June 30, 2021 (the “Outside Date”)
  • The “Outside Date” for the parties to consummate the Transactions was amended to September 30, 2021.

NOTABLE CONDITIONS TO TERMINATION

  • Kismet and Pubco having at least $100 million of cash either in or outside of the trust account, after taking into accounts payments by Kismet for the Redemption and any proceeds received by Pubco under the A&R Forward Purchase Agreement.
  • Amended on 7-19-21: the proceeds of the PIPE will count toward the satisfaction of the $100 million minimum cash closing condition

ADVISORS

  • Credit Suisse, BofA Securities and LionTree Advisors served as financial and capital markets advisors to Kismet Acquisition One Corp.

MANAGEMENT & BOARD

Executive Officers

Ivan Tavrin, 43
Chief Executive Officer & Director

Mr. Tavrin is the founder and principal of Kismet Capital Group, a private investment group, which he founded in 2017 and has managed since its inception. In that capacity, and as part of Kismet Capital Group’s investment strategy, Mr. Tavrin, through special purpose entities controlled by him, acquired LLC Gallery Service in 2018 and acquired an indirect controlling interest in Vertical LLC in 2019. From 2012 to 2016, Mr. Tavrin served as chief executive officer of PJSC MegaFon, or MegaFon, the second largest telecommunications operator in Russia as of December 31, 2016, having led its US$1.8 billion initial public offering and dual listing on the London Stock Exchange and Moscow Exchange in 2012, which was the largest initial public offering of a telecommunications company in Russia at that time. Mr. Tavrin oversaw MegaFon’s growth from 27% to 30% of market share between 2012 and 2015 and a more than two-fold increase in the OIBDA-Capex in the same period. Prior to this, Mr. Tavrin founded UTH Russia Limited, or UTH, one of the largest independent media broadcasting groups in Russia and served as its chief executive officer from its inception in 2009 to 2011. Mr. Tavrin has served as Chairman of the Board of Directors of UTH from 2012 to 2016. In 2015, he led UTH in a transaction to acquire a 75% interest in CTC Media which was at the time listed on Nasdaq. Under new leadership, CTC Media’s profitability improved significantly within the first 12 months of operations after the time of the acquisition. In 2011, UTH formed a joint venture with The Walt Disney Company, or Disney, resulting in Disney buying 49% of one of UTH’s television channels for $300 million, the only transaction between Russian shareholders and a major U.S. film studio of such scale.

In 2019, Mr. Tavrin led an acquisition of an indirect controlling interest in Vertical LLC, one of the leading independent telecommunications infrastructure operators in Moscow. In 2018, Mr. Tavrin, through LLC Media-1, completed an acquisition of LLC Gallery Service, the second largest out-of-home (OOH) advertising operator in Russia and the largest digital OOH operator across the country. In 2013, Mr. Tavrin purchased a significant minority stake in VK, a leading social network in Russia, from its founder facilitating a resolution of a complicated corporate situation. The following year, he sold this stake to Mail.ru Group, VK’s major shareholder, which later became a critical step for Mail.ru Group to consolidate control in VK and alignment of interests of all stakeholders. From 2009 to 2011, Mr. Tavrin held a controlling stake in Netbynet, one of the leading fiber to the home (“FTTH”) operators in Moscow and central Russia, or NBN. He aided NBN’s expansion through the acquisition of 30 local internet service providers and subsequently sold NBN in an auction process, in which MegaFon was the successful bidder. Starting in 2006, Mr. Tavrin built “Vyberi Radio,” a leading regional radio network via a roll-up of 55 stations. In 2001, Mr. Tavrin founded Regional Media Group, which he subsequently merged into a television network TV3, becoming its largest individual shareholder and president, and grew the combined business through the acquisition of numerous regional television assets. He then sold the company to Prof-Media for approximately $550 million. Mr. Tavrin currently serves as a board member of Holding Vyberi Radio LLC and Disney Channel Russia. Mr. Tavrin is a graduate of the Moscow State Institute of International Relations (MGIMO).

 

Board of Directors

Verdi Israelyan, 44
Independent Director

Since June 2016, Mr. Israelyan has served as a managing partner at Grishin Robotics Advisors Limited. He previously held both the chief operating officer and chief financial officer positions of Mail.ru Group between November 2010 and June 2013, and August 2011 and June 2013, respectively. Mr Israelyan served as a director of Mail.ru Group between 2013 and 2016. He was a partner at DST Global between 2009 and 2010. Prior to this, he co-headed CIS operations of the European Special Situations Group at Goldman Sachs in Moscow and worked in the Investment Banking Divisions at both Morgan Stanley and Lehman Brothers. Mr. Israelyan holds an M.B.A. from Rotterdam School of Management, Erasmus University in the Netherlands.

Per Brilioth, 50
Independent Director

Since 2007, Mr. Brilioth has been managing director and a board member of VNV Global Ltd. (formerly Vostok New Ventures Limited), an investment company investing in early and growth stage companies, and he is a director of Vostok Emerging Finance Limited, an investment company listed in Sweden that invests in growth stage private fintech companies. He is also chairman of the board of Pomegranate Investment AB, a Swedish investment company and of Telegram Record, a private holding. Mr. Brilioth currently serves on the boards of Babylon Health, Docplus, Property Finder, Voi Technology, OneTwoTrip, Naseeb Networks, Inc., and is an observer at BlaBlaCar. Previously, Mr. Brilioth was head of the emerging markets section at Hagströmer & Qviberg Fondkommission AB from 1994 to 2000. Mr Brilioth served as chairman of the board of Black Earth Farming Limited, a company that invests in the Russian agricultural sector from 2006 until 2012, and continued to serve on the board until 2014. He also served on the board of RusForest AB from 2010 to 2016, a forestry company operating in Russia. Mr. Brilioth holds a Master of Finance from the London Business School, and is a graduate of Stockholm University.

Clifford Tompsett, 63
Independent Director 

Mr. Tompsett served in various roles at PriceWaterhouseCoopers LLP (“PwC”) from 1979 to 2017. Mr. Tompsett was a partner at PwC until he retired in June 2017. He was an audit partner until 2003 when he then specialised on capital markets and transaction work advising companies on the execution of complex transactions on the London, U.S. and Hong Kong markets. He founded and led PwC’s Global IPO Centre and founded and built PwC’s Equity Advisory business. He has significant experience working with companies in Russia, the Commonwealth of Independent States and other emerging markets, including companies in the telecommunications, media and technology sector, on preparing for an IPO, including advice on corporate governance, financial reporting, controls and risk management. He also has extensive experience working with special purpose acquisition companies on their IPOs and initial acquisitions. Mr. Tompsett is Senior Independent Director and Chair of the Audit and Risk Committee of Cello Health plc and a Non-Executive Director and Chair of the Audit Committee of Reed Global Limited, the recruitment business. He is a Fellow of the Institute of Chartered Accountants in England and Wales, and has an MA in Chemistry from Oxford University.

ByRoman Developer