Consortium makes $1bn bid for Cherry

18 December 2018

Swedish gaming company Cherry has received a $1bn takeover offer from a consortium including UK private equity firm Bridgepoint.

Cherry's independent bid committee said it recommends shareholders accept the offer of SEK 87 in cash per share, which values the company at SEK 9.19bn (€893m/$1.01bn). The company said the offer represents a 20% premium to Cherry's B shares closing price on the Nasdaq Stockholm on Monday.

The consortium, European Entertainment Intressenter BidCo (EE Intressenter), is looking to take over 100% of the company and delist from the Nasdaq Stockholm, noting that should it reach a shareholding of 90% it intends to initiate a compulsory acquisition procedure of the remainder under the Swedish Companies Act.

EE Intressenter comprises Bridgepoint Europe, Prunius Avium, the Klein Group – headed by Cherry chairman and founder Morten Klein - Audere Est Facere, Betsson CEO Pontus Lindwall and two other individuals. This pair, Berkay Reyhan and Murat Can Yilanlioglu, are directors of London-based marketing business Hindigo Marketing, while Yilanlioglu is also a director of Highlight Games, a studio in which Cherry holds a 60.4% stake.

As a result of Klein's involvement in the process, an independent bid committee consisting of acting CEO Gunnar Lind and board members Johan Moazed and Jörgen Olsson were appointed on October 16, and are  handling questions relating to the consortium and the offer. Rolf Åkerlind, who was elected to the board on November 21, has since joined the committee.

In total members of the consortium own 50,100,368 shares in the business, corresponding to approximately 47.4% of the total stock and 37.9% of the total number of votes in the company. The consortium has also secured undertakings to accept the offer from shareholders representing an additional 12,298,332 shares, or an 11.6% stake and 28.5% of the total number of votes. The consoritum therefore has owns, or has secured commitments, from individuals holding 59.1% of the operator's share capital and 66.5% of votes.

Those that have agreed to support the takeover bid include Jonas Cederholm, CEO and co-founder of Cherry's affiliate business Game Lounge, Cederholm's fellow Game Lounge co-founder Fredrik Langeland, and Cherry founders Per Hamberg and Lars Kling.

The acceptance period for the offer begins on December 20 and runs until January 23, though is subject to possible extensions.

Commenting on behalf of the consortium, Bridgepoint Advisers partner Mika Herold said the takeover will provide much needed financial resources to Cherry at a time of regulatory changes.

“We have followed Cherry closely for a long time and have the highest regard for the success and impressive track record that Cherry and its divisional management teams have achieved through driving innovation in the iGaming sector," he said.

"However, we also believe that many of the opportunities and challenges facing Cherry and its subsidiaries are easier to approach in a private setting and with a more favourable capital structure. The changing regulatory environment together with necessary measures to defend and increase Cherry’s market share over time, will require significant investment.

"We have presented a financially attractive offer for the shareholders, which is reaffirmed by the support received from some of Cherry’s largest shareholders. We are confident that the consortium members will be good stewards for the business and the employees going forward.”

The consortium also said it believes that by accepting the takeover, Cherry "will be able to maximise value by focusing on driving the performance of the individual business units rather than managing the combined entity as a public company."

The bid comes two weeks before the re-regulated Swedish market opens on January 1, 2019. Cherry has yet to obtain a licence to operate from the Swedish regulator, although iGamingBusiness.com understands it is confident it will receive its permit before January. The company believes the takeover will not negatively impact its application, citing MRG's recent award during a period when it is in the process of being acquired by William Hill.

Cherry, which owns brands such as ComeOn and CherryCasino, has operations in seven markets. It has gaming licences in Malta, Schleswig-Holstein and United Kingdom, and a betting licence in Poland.

Cherry's share price was up around 18% this morning.