Entain extends into Baltics with £250m offer for Enlabs AB

Entain, formerly known as GVC Holdings, has announced a recommended cash offer for Enlabs AB.  The acquisition further delivers on Entain’s strategy of expansion across new regulated international markets.

Highlights

  • A recommended cash offer of SEK 40 for each Enlabs share
  • This values Enlabs at around SEK 2.80 billion (approximately £250 million) (1)
  • The offer represents a premium of approximately 15.6% and 42.3% compared to the volume-weighted average price of an Enlabs share during the last 90 and 180 trading days prior to the announcement of the offer, respectively
  • The offer has been recommended by Enlabs’ board, and shareholders holding in aggregate approximately 42.2% of the total number of Enlabs shares have undertaken to accept the offer
  • Enlabs is an established and leading gaming company operating in fast-growing markets across the Baltics, with further growth opportunities across Eastern Europe and the Nordics
  • Based on analyst consensus(2) for the year to 31 December 2021 Enlabs is estimated to generate net gaming revenue of €89.5m (c.£80.5 million) and EBITDA of €23.5m (c.£21.1 million) (3)
  • The acquisition is expected to be earnings accretive in Entain’s first full year of ownership
  • Full year 2020 EBITDA is now expected to be in the range of £825m to £845m, representing an increase of 6-8% compared to Q3 guidance

Delivering Entain’s growth strategy

 

Enlabs predominantly operates online sports-betting and gaming brands across the fast-growing Baltic region with a small retail presence.  It is the market leader in Latvia, the second largest in Estonia and a top-five operator in Lithuania.  In November 2020 Enlabs completed the acquisition of Global Gaming, which enables Enlabs to extend its operations into the Nordics through successful and proven gaming brands, including Optibet, Laimz and Ninja.

The acquisition of Enlabs is directly aligned with Entain’s stated growth strategy of entering locally regulated markets where it does not currently have a presence.  The Group believes that Enlabs’ regional market and brand strength combined with Entain’s scale, proprietary technology, product, marketing and regulatory expertise can further accelerate growth and expansion into new territories – both through Enlabs’ brands as well as by leveraging Entain’s existing brands.  The Group also expects to deliver synergy benefits through economies of scale, sharing of best practices and removal of Enlabs’ public company costs.

Enlabs has a strong management team led by Niklas Braathen, who has been instrumental in driving the rapid growth of the business over the last seven years.  Entain will retain the services of Niklas to develop the Group’s operations in the region and its expansion into new markets.  Furthermore, through a family holding company and subject to the offer being declared unconditional, Niklas has undertaken to invest EUR 15 million into shares in Entain within four months of receipt of the consideration under the offer.  The holding company has undertaken not to sell or otherwise dispose of such shares before 31 December 2023.

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Timing and financing

 

The transaction is expected to complete in Q1 2021, subject, inter alia, to requisite regulatory approvals being obtained and sufficient Enlabs shareholders accepting the offer such that Entain becomes the owner of shares in Enlabs representing more than 90% of the total number of Enlabs shares (on a fully diluted basis).  Further details of the offer, including conditions relating to completion, are contained in the offer announcement issued separately this morning, a copy of which is available at www.entaingroup.com.

Entain will finance the cash consideration of approximately £250 million from its existing cash resources.  It is expected that the acquisition will add approximately 0.2x to Entain’s net debt to EBITDA ratio for 2021.

Shay Segev, Entain CEO, commented: “The acquisition of Enlabs is perfectly aligned with our strategy of expanding across new regulated international markets.  We are hugely excited by the growth opportunities it presents both in its existing markets and through new market opportunities.  Enlabs is already a strong and rapidly growing business in its own right, but we now have a fantastic opportunity to turbocharge its growth by leveraging the power of our unparalleled proprietary technology, scale, product and marketing expertise.”

Niklas Braathen commented: “When Entain’s interest to acquire Enlabs emerged, we instantly saw the strategic logic.  Our interaction with them so far has confirmed that they will provide an excellent home for the Company, its customers and employees.  Entain’s experience and track record in many different geographic markets, together with its market-leading proprietary technology and world-class marketing skills are key attractions for Enlabs as we look to grow in the Baltics and beyond.  Finally, Enlabs has achieved an enormous amount as an independent business, but we recognise the established trend of industry consolidation and the growing importance of scale.”