NetEnt to accept 19.6bn SEK public offer from Evolution Gaming

This is what you can call “Booom”! Sweden’s Evolution Gaming Group AB said on Wednesday June 24 it has offered to buy NetEnt AB for 19.6 billion Swedish crowns (US$2.12 billion) in stock. The offer of 79.93 crowns per share represents a premium of 43per cent over NetEnt’s closing price on Tuesday. The acceptance period for the Offer is expected to commence on or around 17 August 2020 and expire on or around 26 October 2020, subject to any extensions and the final settlement date has been set to be 2 November 2020.

NetEnt’s board of directors recommends the shareholders to accept the offer from Evolution Gaming, which will seal a landmark deal! A deal that is expected to accelerate Evolution’s move towards becoming the world leader in the online gaming industry.

“The board of directors, as part of its process to evaluate the Offer and in line with its fiduciary duties, has investigated other opportunities in light of the approach by Evolution Gaming, but the combination with Evolution Gaming is in the view of the board the best current option.

In its evaluation of the Offer, the board has also taken into account that NetEnt’s largest long-term family shareholders representing 68.22 per cent of the votes and 29.50 per cent of the capital, have signed irrevocable undertakings to accept the Offer, subject to certain conditions, or stated that they intend to sign such irrevocable undertakings”.

The recommendation of NetEnt’s board of directors

“In the board’s opinion, NetEnt has a proven and well-defined strategy going forward. However, the board views a combination of NetEnt and Evolution Gaming as positive and believes it to be strategically sound, and the share consideration allows the Company’s shareholders to take part of the combined accelerated growth story and combination benefits.

The combination of NetEnt and Evolution Gaming would create a leading B2B provider in online casino.

The board believes there are a number of strategic benefits to NetEnt from combining its operations with Evolution Gaming, including:

  • The combination will provide substantially increased scale and create a leading supplier of online casino products within Live and slots
  • As part of Evolution Gaming, NetEnt will be able to leverage Evolution Gaming’s strong market position in the Live segment to further strengthen its market position in the slots segment
  • The combination will have significant capabilities to leverage its strong position within the US states that have opened up for online casino
  • The enlarged entity will provide enhanced client and products diversification to better address a changing market environment
  • Combining two world class technology organizations will provide a robust basis for new and innovative products to the benefit of customers and end-users

The Offer represents a significant premium to the prevailing NetEnt share price before announcement of the Offer and the Offer price is also well above the consensus target price of research analysts before announcement of the Offer.

The board of directors unanimously recommends the shareholders of NetEnt to accept the Offer”.

Effects on NetEnt and its employees

In its press release announcing the Offer, Evolution Gaming states:

“Evolution is confident that it will be able to build a strong group together with NetEnt’s senior management and employees. Evolution recognises the value of NetEnt’s senior management and other employees and appreciates that their talent and dedication have been, and will continue to be, integral to NetEnt’s and the combined group’s success. Evolution does not currently foresee that the combination of the companies will have any material impact on Evolution’s or NetEnt’s respective employees, including their terms of employment or the locations where the companies currently operate. Following the completion of the Offer, Evolution intends to carry out a careful review of the combined business in order to evaluate how Evolution can organise and develop the group in the best possible way.”

Evolution Gaming and NetEnt chairmen comments

Chairman of Evolution, Jens von Bahr commented: “This strategic deal marks a significant step towards Evolution’s long-term vision of becoming the global market leader in the online casino industry. The combination of Evolution’s strong offering in Live Casino with NetEnt’s leading position in online slots will result in a world class portfolio of online games that will enable us to serve a growing customer base. Furthermore, NetEnt’s established US positioning combined with Evolution’s existing US studios and first-to-regulated-market strategy will put us in a favourable position to capitalise on the on-going regulation in North America.”

NetEnt’s Chairman Mathias Hedlund added: “Recently, NetEnt has vastly improved its tech and product development capabilities and thereby its growth prospects and at the same time reaching a strong position within the US states that have opened up for online casino. With this deal, there are unique possibilities to shape a leading global B2B provider of online casino, taking advantage of the market development with continued digitalisation and strong growth, especially in North America. Evolution’s position within Live Casino combined with NetEnt’s position within online slots will create a company well positioned to take significant market shares. Through this transaction, a new chapter in the development of more entertaining online casino begins, in the best interest of players, operators, employees and shareholders.”

The Offer in brief

  • Evolution offers 0.1306 Evolution shares for each share in NetEnt. Evolution will not increase the offered consideration.
  • The Offer values each share in NetEnt to SEK 79.93 and all shares in NetEnt to approximately SEK 19.6 billion.
  • The offered consideration represents a premium of 43 per cent compared to the closing price of the NetEnt share of series B on Nasdaq Stockholm on 23 June 2020 (which was the last trading day prior to the announcement of the Offer) and a premium of 72 per cent compared to the volume weighted average price per NetEnt share of series B on Nasdaq Stockholm during the 30 latest trading days up to and including 23 June 2020.
  • The board of directors of NetEnt unanimously recommends the shareholders of NetEnt to accept the Offer.
  • Shareholders who in total directly or indirectly control 21.02 per cent of all shares and 45.02 per cent of all votes in NetEnt have undertaken to accept the Offer. In addition, certain board members of NetEnt who in total directly or indirectly control 8.48 per cent of all shares and 23.20 per cent of all votes in NetEnt have expressed that they intend to undertake to accept the Offer.
  • The completion of the Offer is conditional upon, among other things, the Offer being accepted by shareholders to such an extent that Evolution becomes the owner of more than 90 per cent of the shares in NetEnt (on a fully diluted basis) and that an extraordinary general meeting in Evolution resolves to authorise the board of directors to resolve on the issuance of the number of shares in Evolution that Evolution shall pay as consideration to the shareholders of NetEnt that accept the Offer. Shareholders who in total control approximately 32.53 per cent of all shares and votes in Evolution have expressed that they are positive to the Offer and that they intend to vote in favour of the board of directors’ proposal for an authorisation to issue shares.
  • Evolution will publish an offer document regarding the Offer on or around 14 August 2020. The acceptance period of the Offer will commence on or around 17 August 2020 and expire on or around 26 October 2020.

Background and reasons for the Offer

  • This is a landmark deal which will accelerate Evolution’s move towards becoming the world leader in the online gaming industry.
  • The merger of Evolution’s leading position in Live Casino with NetEnt’s strong position in online slots will create a best-in-class B2B provider with capacity to drive the digitalisation of the global gaming industry (90 per cent of the global casino industry is still land-based).
  • The US market has a potential to become Evolution’s largest market over time as individual states regulate. The merger of Evolution’s existing Live Casino offering through the existing New Jersey studio as well as the planned studios in Pennsylvania and Michigan with NetEnt’s strong US presence in online slots will accelerate this development and fast-track the combined company’s move into the US online gaming market.
  • The combined product portfolio will include some of the world’s most popular Live Casino and online slots games and generate revenue upsides through cross-selling and improved distribution via both companies’ customer bases, with closer customer partnerships and additional geographical spread of the companies’ products as result. The range of the combined offer will provide significant upsides to customers and player experience as well as enable new collaborations between world-class development resources.
  • The combination is expected to result in annual cost savings of approximately EUR 30 million, compared to the combined cost basis of NetEnt and Evolution as of the first quarter of 2020. This includes the cost savings of approximately SEK 150 million which NetEnt has already disclosed.
  • The combined company will become a leading online gaming provider with a strong platform for international growth and expansion, both organic and through additional acquisitions.
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