Evolution makes SEK19.6bn bid for NetEnt

24 June 2020

Evolution Gaming has tabled a $2bn bid for slots giant NetEnt in a deal designed to strengthen their position in the US market.

Stockholm-listed Evolution said the ambitious SEK19.6bn ($2.11bn/€1.87bn) offer for the casino game developer signalled its intent to become “the world leader in the online gaming industry”.

The offer has been welcomed by NetEnt chairman Mathias Hedlund, who said the combination of his group’s reach in online slots and Evolution’s live casino product would give it greater leverage in expanding markets, such as North America.

The offer of SEK79.93 per share represents a premium of 43% over NetEnt's closing price on the Nasdaq Stockholm Tuesday. It is a premium of 72% compared to the volume weighted average price per NetEnt share during the 30 latest trading days.

Evolution said that shareholders owning around 20% of NetEnt have already indicated they will accept the offer, while the board of directors unanimously recommended other shareholders back the bid. Board members who in total directly or indirectly control 8.48% of all shares and 23.20% of all votes in NetEnt have expressed that they intend to undertake to accept the offer.

The combination is expected to result in annual cost savings of approximately €30m, compared to the combined cost basis of NetEnt and Evolution as of the first quarter of 2020.

Evolution said it will publish an offer document on or around 14 August, with the acceptance period to expire in on 26 October. The transaction is expected to then be finalised on 2 November.

“This strategic deal marks a significant step towards Evolution’s long-term vision of becoming the global market leader in the online casino industry," Evolution chair Jens von Bahr said.

“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.”

Evolution said the merger will create a best-in-class B2B provider with capacity to drive the digitalisation of the global gaming industry, noting that 90% of the global casino industry is still land-based.

The group added that the US market has a potential to become Evolution’s largest market over time as individual states regulate. The merger of its existing live casino offering through the existing New Jersey studio as well as the planned studios in Pennsylvania and Michigan with NetEnt’s US presence in online slots “will accelerate this development” and fast-track the combined company’s US expansion.

The business' combined revenue for the first quarter of the year was SEK1.75bn (£150.4m/€166.2m/$187.6m), of which SEK1.23bn was generated by Evolution, and SEK517.5m. Combined operating profit would have been SEK728.3m. Evolution said it does not currently foresee that the combination of the companies will have any material impact on Evolution’s or NetEnt’s respective employees.

Welcoming the bid, Mathias Hedlund, chairman of NetEnt, 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.”

Evolution’s share price is down 9.64% at SEK553.00 per share this morning (24 June), having reached a 52-week high of SEK619.00 earlier. Its current market capitalisation is SEK110.71bn.

NetEnt’s revenue increased slightly year-on-year to SEK1.79bn in 2019, with a profit of SEK428.9m, down 25.7%. Its shares are trading up 26.79% this morning at SEK71.00 per share.