Golden Matrix Group acquires 80% stake in Classics for a Cause, expanding into consumer loyalty

Golden Matrix Group, Inc. (Nasdaq: GMGI) has entered into a definitive agreement to acquire an 80% controlling interest in Classics for a Cause Pty Ltd (CFAC), a prominent Australian-based online discount platform. This move marks a significant expansion for GMGI, positioning it strongly within the consumer loyalty and rewards sector while complementing its existing gaming and sports betting operations.

Strategic Acquisition Details

Under the terms of the agreement, Golden Matrix Group will purchase its 80% stake in CFAC at an approximate valuation of $8.4 million, representing roughly five times CFAC’s profit before tax for the fiscal year ending June 30, 2024. The acquisition price includes an earnout component and is structured with 70% of the payment made in cash and 30% in restricted shares of GMGI common stock. The agreement also includes provisions for a holdback amount and earnout contingent upon CFAC meeting specific post-closing profit targets. Additionally, GMGI holds an option to acquire the remaining 20% minority interest.

The transaction is subject to customary closing conditions and is expected to be finalized within the next few days, with an effective date of August 1, 2024.

CFAC’s Market Position and Performance

Classics for a Cause operates a successful business-to-consumer (B2C) platform that provides members with access to exclusive discounts from a broad array of retailers across Australia. The platform’s unique selling point is its promotional giveaways, which feature high-end American and Australian classic cars, caravans, campers, cash prizes, and vacation packages. The company’s revenue model relies on membership fees, which contribute significantly to its financial performance.

For the fiscal year ending June 30, 2024, CFAC reported revenues exceeding $10 million and an operating profit before tax of approximately $1.9 million. The company has demonstrated strong financial health, with considerable free cash flow over the past two years. CFAC boasts a robust social media presence with more than 50,000 followers and a customer base exceeding 300,000. Notably, over 10,000 active monthly subscribers contribute more than 30% of CFAC’s total revenue through recurring monthly subscriptions.

Strategic and Operational Implications

Brian Goodman, CEO of Golden Matrix Group, emphasized the strategic fit of the acquisition. Goodman highlighted that CFAC aligns with GMGI’s strategy of acquiring profitable, accretive businesses. He noted the success of GMGI’s previous acquisition, RKings Competitions, and expressed optimism about similar positive impacts from CFAC. The acquisition is anticipated to enhance GMGI’s revenue streams, improve cash flow, and contribute to the company’s bottom line profitability. Furthermore, GMGI plans to leverage CFAC’s platform to scale its operations and implement technological upgrades.

Thomas Bailey, founder of CFAC, expressed enthusiasm about the partnership, highlighting the potential for CFAC to expand into new markets and reach new heights. Bailey, who co-founded CFAC in 2019, will continue in an executive role, driving the company’s growth and leading its expansion into the U.S. market. With a strong background in marketing and growth strategies, Bailey is well-positioned to steer CFAC’s future development.

Market Trends and Future Growth

The consumer loyalty and rewards market is on a growth trajectory, with Research and Markets forecasting a compound annual growth rate (CAGR) of 9.5% from 2024 to 2028. The market is expected to expand from $3.64 billion in 2023 to $5.79 billion by 2028. This growth trend underscores the strategic value of GMGI’s acquisition and highlights the increasing importance of loyalty programs in driving consumer engagement and revenue.

Classics for a Cause Pty Ltd is a leading discount club in Australia, offering valuable rewards and exclusive discounts. Established to support veteran charities, CFAC has donated over $3 million and continues to contribute to various veteran programs. The organization gives away two high-end classic cars each month, with plans to increase this to four per month and expand into additional prize categories.

Based in Las Vegas, Nevada, Golden Matrix Group is a prominent player in the gaming technology sector, operating globally across multiple markets. The company specializes in both B2B and B2C sectors, providing innovative gaming solutions. Golden Matrix’s recent expansion includes the acquisition of Meridianbet, a major B2B and B2C sports betting and gaming platform.