Dutch Court Orders Sega Sammy to Finalize €130M Sngakelogic Acquisition

The Japanese global holding company attempted to step away from the deal, citing significant regulatory and compliance concerns shifting its initial risk projectionsImage Source: Shutterstock.com

A Dutch court has ordered Sega Sammy Holdingsto proceed with its €130 million ($147.25 million) acquisition of Dutch game developer Sngakelogic, rejecting the Japanese gaming giant’s bid to cancel the deal over regulatory concerns. The outcome of this case underlines the importance of proper due diligence during M&A operations and could set a precedent for similar deals.

Sega Sammy Alleged the Deal Would Expose It to Unexpected Risks

Amsterdam District Court JudgeC.W.D. Bom’s ruling maintains the July 2024Share Purchase Agreement (SPA) between Sega Sammy’s subsidiary, Sega Sammy Creation (SSC), and a consortium of Sngakelogic’s sellers, including Triple Bells, Bettor Capital, and Oakvale Ventures. While the Japanese company first pursued the acquisition to expand its iGaming sector presence, it rapidly shifted its stance mid-deal.

The two companies were initially pleased with the agreement. Sega Sammy hoped to leverage Sngakelogic’s established European market presence and expansive portfolioof innovative online slots and live dealer products. The B2B supplier also remained optimistic regarding the deal, noting it would help its titles reach more regulated jurisdictions.

Sega Sammy attempted to withdraw from the purchase, citing “unresolved regulatory concerns.” The company referred to Sngakelogic’s alleged violations of Japanese and Turkish gambling regulations. Sega Sammy claimed such breaches broke pre-completion obligations, justifying its legal right to rescind the contract. The company also contended that itneeded more timeto determine whether Sngakelogic offered its titles in jurisdictions where online gaming is prohibited.

The Court Dismissed Most Allegations

Despite Sega Sammy’s concerns, the court rejected the company’s arguments, underlining that the SPAexplicitly prohibitedany form of rescission. Judge Bom emphasized that all perceived infractions could be resolved viamonetary damagesrather than by abandoning the deal altogether. The court also cast doubt on allegations that Sngakelogic would fail to utilize geo-blockingacross its products.

It is undisputed that Sngakelogic is paying for geo-blocking services, so it is implausible that Sngakelogic would not use these services for jurisdictions where online gambling is strictly prohibited.

Judge C.W.D. Bom

Judge Bom also pointed out that Sega Sammy’s internal testing had only accessed demo versions of the games in prohibited jurisdictions, withno indicationthat real-money versions were available. The court also noted that Sngakelogic’s status as a B2B provider mostly insulated itfrom potential criminal charges, even if the regulatory concerns proved valid.

Sngakelogic is not the company running the website which provided access to its games, but only a content provider.

Judge C.W.D. Bom

In a decisive final order, the court gave Sega Sammy Holdings Inc. and Sega Sammy Creation two weeks to finalize the acquisition, threatening a €10 million($11.33 million) non-compliance penalty. The ruling paves the way for the highly anticipatedcompletion of the deal. Despite Sega Sammy’s misgivings, the company will likely try to make the best of the situation and continue its expansion into the iGaming and digital content space.

Correction: A previous version of this story incorrectly stated that the ruling was delivered by a Swedish court. In fact, the decision was issued by the Amsterdam District Court. We are sorry.