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Evolution Gaming to Acquire NetEnt for $2.1B

Disa Stigh

Estimated Time 12 min

July 15, 2020

Evolution Gaming, headquartered in Sweden and publicly traded on the Nasdaq Stockholm exchange, is a company that specializes in business-to-business online live casino services. NetEnt is also based in Sweden and traded on the Stockholm exchange. The online casino technology supplier segment is joining the gambling industry’s consolidation craze as live dealer specialists Evolution Gaming launched a takeover bid for random number generator (RNG) online slots stars NetEnt. Evolution has offered NetEnt 19.6 billion Swedish crowns ($2.12 billion) in stock for its portfolio of interactive casino games. The acquisition will be an all-stock transaction, should it be executed. Evolution Gaming is known for its B2B live dealer studios that allow internet gamblers to interact with an actual human dealer whereas NetEnt is known for their online slot machines.

The offer

The offer represents a 43% premium of where NetEnt shares closed at the end of trading the day before the offer was made. The Stockholm-listed Evolution Gaming announced a SEK19.6b (US$2.11b) offer to acquire NetEnt in a bid to create what Evolution called “the world leader in the online gaming industry.” The official offer document will be published in mid-August with a deadline for acceptance on October 26th and possible completion of the acquisition by November 2nd.

 NetEnt’s board has unanimously recommended the shareholders to accept the offer, which Evolution has warned it will not increase. After NetEnt’s board of directors recommended accepting the offer, shareholders indicated they, too, would approve of the acquisition. NetEnt’s largest long-term family shareholders, who represent 68.2% of votes and 29.5% of the company’s capital, have either signed irrevocable undertakings to accept the offer or made statements indicating their intention to sign such undertakings.

Impact on revenue

The two companies generated combined revenue of around €536m last year, despite each struggling to adapt to Sweden’s new regulated online gambling market. Both companies reported strong growth in the US market during the first quarter of 2020, while Evolution’s Asian-facing business nearly tripled in Q1. Evolution expects the deal to result in annual cost savings of about 30 million euros ($34 million) and to have a positive effect on earnings per share in 2021. Evolution CEO Jens von Bahr said the combination of his firm’s live casino offering with NetEnt’s online slots experience would create “a world-class portfolio of online games that will enable us to serve a growing customer base.” The combo would have a strong position in the growing US market, thanks to NetEnt’s existing B2B deals and Evolution’s growing stable of North American live dealer studios. Evolution claimed that the combination would not result in significant reductions in either company’s staff, although the companies do expect annual ‘synergies’ of €30m, which will likely take more than just sharing company letterhead.

Online gaming leader

Founded in 2006, Evolution Gaming today has eight live gaming studios from which it offers internet casino platforms of live table games with dealers speaking in the native language of their customers. Evolution’s studios are located in Latvia, Malta, Georgia, Romania, Canada, Belgium, Spain, and Atlantic City. The company claims to supply more than 300 iGaming operators around the world. Notable clients include DraftKings, William Hill, GVC Holdings, Paddy Power, Svenska Spel, 888, Rush Street Interactive, PokerStars, and Betfair. While NetEnt specializes in online slots. Its game “Narcos” was named the “2019 Best New Slot Game” by Casino.org. Evolution Gaming provides live casino services for Royal Panda, which was also named “2019 Best Live Casino” by another survey. Combining the two companies, Evolution Chairman Jens von Bahr says, will position the group as “a market leader in the global online gaming industry.” “With Evolution’s position in live casino and NetEnt’s position in online slots, the merged company will be well-positioned to capture significant market shares,” said NetEnt Chairman Mathias Hedlund.

Future of gambling

In an interview with Gambling Insider, Evolution Gaming CEO Martin Carlesund opined that the COVID-19 pandemic that caused the closures of land-based casinos around the globe will have a lasting impact on the industry. The iGaming executive said he believes the “online evolution” of gambling has only just begun, and that “50-70% of the casino (revenue) will be online” in the future. In total, 90% of revenue in casinos is still land-based and 10% is online,” Carlesund explained. As to when online casinos will surpass brick-and-mortar gaming in terms of revenue, the CEO believes the coronavirus will only expedite play to the internet. “Maybe this pandemic has increased the speed a bit, but the potential has always been there for online casinos in general,” he concluded. Morgan Stanley said in an investment note that in the post-coronavirus world, gaming companies that have online and sports betting components might be more sound investments than traditional land-based casino operators.

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