Evolution Gaming wants to buy NetEnt for £1,7 billion

Online casino software giant Evolution Gaming recently went public about a plan to acquire NetEnt. In a move that is likely to shake the casino software industry, Evolution has placed an attractive 2 billion offer to buy a 90% stake in NetEnt.

This will see Evolution exchange 0.1306 shares for each NetEnt’s share, pricing each at SEK 79.93 (£6.95), with the total amounting to SEK 19.6 billion (£1,7 billion). The proposed consideration of each share constitutes a premium of 43%.

This is in comparison with the closing value of NetEnt’s share on the Nasdaq Stock exchange on 23rd June, 2020.

Why the deal?

Jens von Bahr, the chair of Evolution Gaming was confident that the acquisition would speed up its agenda of becoming a global leader in the online casino industry.

He asserted that a blend of his firm’s Live Casino offering plus NetEnt’s slots will lead to an awesome portfolio of casino games. NetEnt’s Chair, Mathias Hedlund, stated that the merger will spur the growth of more pleasant online casinos that have the best interests of players, shareholders and operators.

Both directors agreed that the resulting consolidated capacity will create a provider with a privileged position in strategic markets like the North American one.

Landmark deal to own online gambling

To the NetEnt’s managing board, the acquisition deal turned out to be too good an offer to ignore. The managers therefore unanimously made a recommendation that their shareholders take up the deal.

In its consideration of the offer, the board maintained that it had taken into account a number of factors which it deemed relevant. This included, but was not limited to current market conditions, the firm’s present financial and strategic position, operational challenges, associated risks and opportunities and anticipated future developments.

The board also affirmed that it viewed an amalgamation between Evolution Gaming and NetEnt as “positive” and “strategically sound.”

Cutting costs and boosting revenue

Evolution expects that this agreement will save costs of roughly $30 million hence attaining desirable revenue per share in 2021. This figure was computed using the cumulative costs for both firms in the 1st quarter of 2020.

The estimates include the SEK 150 million (£13 million) worth of NetEnt’s costs savings that were previously revealed. Similarly, Evolution has experienced exponential growth in the recent past, with an 89% increase in net profit as it seeks to widen its US coverage.

However, Evolution states that the key benefit will not be entirely on cost-cutting but also to increase income. The firm therefore doesn’t anticipate any “essential changes” to this combined workforce.

The way forward

Going forward, Evolution has categorically stated that it won’t raise its current offer.

The period to take up this offer starts on 17th August and ends on 26th October.

What’s now required is for enough NetEnt shareholders to accept the deal so that Evolution owns over 90% of the total shares. Fortunately, Nasdaq has reported that a number of big shareholders who own roughly 45% of the firm have already welcomed this offer.

In the event Evolution hits the 90% mark, a mandatory buy-out process for the rest of the shares will be initiated as it is stipulated in the Companies Act of Sweden.

Final thoughts

When NetEnt took over Red Tiger Gaming, there arose speculations over impending collaborations. It has now come to pass with this deal between the industry’s two big names.

This merge will certainly open up new frontiers across the world, thereby simplifying distribution and enhancing players’ experience. The collaboration is also proof of a long-term vision, especially in penetrating the lucrative gambling arena of the US.

Evolution is known to have a stranglehold on Live Casino. Blend this with the good US presence of NetEnt, and you have a formidable force that has the potential of blowing the gates wide open into the large software market.