By: Tomas Ronolski - AllPennyStocks.com News

Wednesday, May 21, 2014

Sometimes wheels turn slow or deals do not come to fruition. That’s just the nature of the beast with mergers and acquisitions. A point-in-case is the repeated offers of Pfizer, Inc. to try and buy AstraZeneca in the recent weeks, first for $106 billion and then for about $120 billion. AstraZeneca, claiming the price undervalued the company and a merger brought forth risks that weren’t in the best interest of AZN shareholders, rebuffed both offers. Although on a much smaller scale, developmental firm Empire Global Corp. (OTCQB:EMGL) had a deal recently pulled out from under it as the Ontario, Canada-based upstart tries to build a portfolio of assets through acquisition strategies. Empire was effectively a shell company as defined by SEC Rule 12b-2 until it penned a lease assignment agreement in January to lease with the option to buy the El Sabanero Beach Hotel and Casino situated on Flamingo Beach, in Santa Cruz, Guanacaste, Costa Rica. The deal called for Empire to pay $15,000 per month in rent with an option to purchase the property – which TripAdvisor.com shows a 4/5 star rating – for $5 million if the option was exercised between May 1, 2014 and April 30, 2015.

According to an 8-K filed with the SEC on the first of April, the agreement was terminated as the owner of El Sabanero, James Randy Brasher and Yon (Kim) Hee Burton of Florida, received an offer from another party to purchase the property. Empire apparently countered with an offer, but the negotiations failed to reach amicable terms. So, back to a shell.

Sharesholders of EMGL are likely hoping that another acquisition pans out more favorably. Late in January, Empire reported signing a letter of intent to acquire Multigioco Srl, a Rome, Italy-based licensed gaming operator organized in 2011. Incidentally, the news for the LOI to acquire Muligioco came out about one month after the company reported signing the LOI to acquire 100 percent of Newgioco Srl., a Rome-based licensed gaming operator, for 450,000 euro. (Nothing is quickly apparent as to what happened with this LOI, meaning further due diligence is required pertaining to this agreement.) At the time, filings showed that Multigioco had more than 750 venues under its license, mostly located in central and south Italy. The company also has online operations certified for PosteItalia, MasterCard, Visa and Skrill Gaming Card use. Mobile apps are in the making, according to Empire.

Multigioco generated revenue of 71 million euro (US$97.36 million) last year through its offerings, which include sports betting, lottery distribution terminals, online casino, online poker and other card games, slots, bingo and video lottery terminal games.

After Tuesday’s closing bell, Empire announced that it has taken the next step in the acquisition, signing a material definitive agreement to acquire Multigioco. Apparently, Multigioco has expanded, as the press release shows that the company now has more than 850 venues under license (as compared to 750 in the January statement). The acquisition entails Empire acquiring all the shares of Multigame Enterprise Ltd., a recently formed Maltese LLC controlling 70 percent of Multigioco, whose principals include Giuseppe Joe Parolini, a successful businessman, investor and member of the Soccer Hall of Fame. Empire can acquire the remaining 30-percent stake in Multigioco through two equal payments at the end of year two and year three, respectively, from the closing date of the transaction.

Upon completion of the transaction, Multigame and Multigioco will become wholly owned subsidiaries of Empire. Parolini is slated to become interim president of Empire as part of the transaction.

For the 100-percent equity interest in the companies, Empire will pay 3 million euro (US$4.11 million) plus three million shares of EMGL, provided that the maximum earn-out performance is achieved over the next two years. The shares and a cash payment of 750,000 euro (US$1.03 million) are due at closing, which is expected by the end of June. The remaining payments are scheduled for the first, second and third anniversaries of the transaction closing date and based upon gross gaming revenue and EBITDA (Earnings Before Interest, Income Tax, Depreciation
and Amortization). In short, the contract is constructed to mean that Empire could acquire Multigioco for as little as the first payment (750,000 euro + 3 million shares) or a maximum of the aforementioned 3 million euros, plus the 3 million shares, depending upon sales and profit increases over the course of three years.

The first thing investors will be looking for is Empire coming up with the $1.03 million in cash. Financing would certainly seem possible, based upon Multigioco’s reported revenue, and Empire reportedly making a $25,000 deposit to Multigioco and a $25,000 deposit to an investment banking firm for future financing, although the company reported zero cash as of its March 31 quarterly filing. The shares are slightly dilutive, but not that big of an issue as the company has a tight share structure of only 18.68 million shares outstanding. Empire has never generated revenue and has a blank portfolio, even though it has been around as Empire Global Corp. (previously Pender International) since 2005. The question is: Is this finally the real thing? Proper due diligence is required to answer that question. Shares jumped ahead by 100 percent to 30 cents on limited volume of 17,500 ahead of the after-market announcement of a definitive agreement.

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