MTG invests in InnoGames & enters multi-billion dollar online gaming market

· MTG adds gaming as third vertical in MTGx’s portfolio of digital
entertainment companies by acquiring  35% of fast growing online games developer
and publisher InnoGames, with option to acquire up to 51% stake
  · InnoGames has generated compound annual revenue growth of more than 20% over
the last 3 years, with expected revenues of approximately EUR 125m in 2016 and
an EBITDA margin of approximately 20%. The acquisition will be EPS accretive in
year one
  · More than 150 million registered players of InnoGames’ successful free-to
-play Elvenar, Tribal Wars I & II, Grepolis, The West and Forge of Empires. Over
50% of new player registrations are on mobile platforms and share of mobile is
rising fast

MTG has entered into an agreement to acquire 35% of InnoGames, a leading global
online games developer and publisher, from Eight Roads Ventures and the
Company’s founders. The transaction is based on an Enterprise Value of EUR 260m
for 100% of the company. MTG has an option to acquire a further 16% of the
company at the same valuation. The transaction is subject to German and Austrian
merger approvals. MTG will report its share of InnoGames’ earnings as associated
company income, which will be included in its MTGx segment.

The investment is in line with MTG’s digital strategy to invest in relevant,
complementary and scalable digital content and communities. It creates a third
digital entertainment vertical for MTGx alongside its esports and MPN
businesses. MTG’s ESL and DreamHack are the leading players in esports, which is
the fastest growing professional sport and will engage over 250 million
worldwide fans in 2016, while content from MTG’s MPNs Zoomin.TV and Splay
generate some 2.5 billion online views every month, of which 25% are related to
gaming content. Esports/gaming is one of the largest and fastest growing online
content categories, and a recent industry report in Sweden found that more
people watched esports/gaming online than traditional sports during Q2 2016.
MTGx’s revenues grew by 50% on a like for like basis in Q2.

Gaming
The gaming industry’s revenues are expected to grow at a compound rate of 7%
from 2015 to 2018 to a total of USD 113bn, of which USD 51bn is expected to come
from browser and mobile based gaming. Mobile based games is the fastest growing
segment, with an anticipated compound growth rate of 12% over the same period
driven by larger audiences, more paying players, and increasing average spend
per player.

InnoGames
InnoGames, founded in Hamburg in 2007, is a large scale global online games
developer and publisher with a proven track record in creating popular strategy
and role-playing games. It operates a 100% free-to-play model with revenues
coming from in-game purchasing. The company runs four studios (three in Hamburg
and one in Dusseldorf) and employs 400 people. The US is InnoGames’ largest
market in terms of revenue (>25%), followed by Germany (>15%) and France (~10%).
InnoGames has generated compound annual revenue growth of more than 20% over the
last three years, with expected revenues of approximately EUR 125m in 2016. The
Company has been profitable from year one and margins are high and stable, with
an anticipated EBITDA margin of approximately 20% in 2016. The company has 150
million registered users and a portfolio of popular cross-platform titles that
keep gamers engaged through constant and innovative live game operations.
InnoGames has already successfully introduced mobile versions of its games, and
more than half of all new user registrations are on mobile platforms. Several
new mobile-only game titles are currently under development and to be released
in the next 12 months. InnoGames’ management team will continue to drive the
development of the company moving forward.

Transaction overview
The 35% stake is being acquired in two tranches: 21% in Q4 2016 and 14% in Q1
2017. The 100% Enterprise Value of EUR 260m is equivalent to 2.1x 2016 expected
sales and 10.4x expected EBITDA. MTG has the right to acquire a further 16% of
the company at the same Enterprise Value until the end of September 2017, and
options to increase its shareholding further over time. MTG will also report
approximately SEK 20m of transaction related expenses in its Q3 results, with
the remainder of the M&A costs arising from this transaction included in the
fourth quarter.

Jørgen Madsen Lindemann, MTG President and CEO: “We have been involved in the
gaming space for a while now, and look for companies with clear track records in
IP development that have translated into high revenue growth and a healthy
profitability profile over time. This we have found with InnoGames. We are
focused on digital verticals with global potential, and gaming is a truly global
industry. InnoGames is the right partner due to its established position in the
industry, fast growing mobile user base, and exciting pipeline of new releases.
We are now present in three complementary digital video storytelling verticals,
and we will invest to expand this presence further.”

Hendrik Klindworth, InnoGames CEO: “We have scored major success with our live
games and are now focusing on the development of several new mobile first
titles, while maintaining our high quality operation of all live games. MTG’s
international presence, understanding of storytelling entertainment, and
commitment to IP development and building engaged user communities will bring
our games to even larger audiences around the world. MTG’s culture of empowering
entrepreneurial spirit is exactly what we were looking for as we move into the
next chapter of our story. The team could not be more excited about further
boosting our future potential and performance.”

Arnd Benninghoff, MTG EVP and MTGx CEO: “Gaming is a multi-billion dollar
industry with more than 2 billion players worldwide. It is also one of the main
sources of entertainment for millennials and digital natives of all ages. Gaming
is a clear and consistent thread that connects our digital focus and business
portfolio. We already have the distribution platforms and windows through our
digital businesses, and we are now adding even more relevant content. We very
much look forward to working with InnoGames management and the whole team to
drive the continued success of our businesses, and bring our communities even
more great experiences.”

InnoGames and its shareholders have been advised by the technology investment
bank GP Bullhound on the transaction.

Investor conference call at 09.00
Presentation materials will be made available on www.mtg.com and MTG will host a
conference call today at 09.00 CET. The call will be hosted by Jørgen Madsen
Lindemann, President & CEO, and Arnd Benninghoff, MTG EVP and MTGx CEO.

Please join us by dialling:
Sweden: +46 (0)8 5065 3942
UK: +44 (0)20 7026 5967

And using access pin code 9057207

To ensure that the conference call starts on time, please dial in 5-10 minutes
before the scheduled start time.

See more from InnoGames’ games here:

Forge of Empires: https://www.youtube.com/watch?v=e11X1Jl_lMk,
https (https://www.youtube.com/watch?v=xGE
-Op_eAJU):// (https://www.youtube.com/watch?v=xGE
-Op_eAJU)www.youtube.com/watch?v=xGE-Op_eAJU
Elvenar: https (https://www.youtube.com/watch?v=zk0_frIIL
-I)://www.youtube.com/watch?v=zk0_frIIL-I
Tribal Wars: https (https://www.youtube.com/watch?v=zv
-VuRmp8LU)://www.youtube.com/watch?v=zv-VuRmp8LU

****

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MTG (Modern Times Group MTG AB (publ.)) is a leading international digital
entertainment group and we are shaping the future of entertainment by connecting
consumers with the content that they love in as many ways as possible. Our
popular entertainment brands span Content Production, TV, Radio and eSports, and
are available around the world. Born in Sweden, our shares are listed on Nasdaq
Stockholm (‘MTGA’ and ‘MTGB’). This information has been published in accordance
with the EU Market Abuse Regulation and/or the Securities Markets Act or the
Financial Instruments Trading Act. The information was submitted for publication
at 07.30 CET on 13 October 2016.

About InnoGames
With over 100 million Euros revenue in 2015 and more than 150 million registered
players, InnoGames is one of the world´s leading developers and providers of
online games. Founded in 2007, the company is based in Hamburg and Dusseldorf
and currently employs over 400 professionals from 30 nations. InnoGames has
scored major success with games such as Tribal Wars, Grepolis and Forge of
Empires.

About Eight Roads Ventures
Eight Roads Ventures backs technology entrepreneurs with aspirations for
greatness. By combining a collaborative approach with the strength and resources
of the Fidelity network and a near 50-year history of investing, Eight Roads
helps companies across the globe accelerate their growth and become leaders in
their field. A strong track record includes investments in Alibaba, Appsflyer,
CloudByte, Cúram (IBM), Made.com, Manthan Systems, Metaps, NewBay (RIM) and
Treatwell (Recruit). In Europe, Eight Roads Ventures is currently investing a
£150 million fund focused on enterprise, consumer and financial technology.
www.eightroads.com @8roadsventures (Claire Davies +44 (0) 7795 605 657
claire.davies@eightroads.com)