Entain shares plummet after £600m M&A fundraise
Entain shares fall after Ladbrokes owner raises £600m to fund acquisition of Polish gambling operator STS
- STS is the largest sports betting provider in Poland with 400 retail locations
- In 2022, it achieved adjusted pre-adverse earnings of around £50 million
Entain shares plummeted after the owner of Ladbrokes revealed he had raised around £600 million from investors to fund the acquisition of a Polish sports betting provider.
The company plans to use the money to buy STS through a joint venture with EMMA Capital, of which it owns 75 percent, for a total consideration of £750 million.
Entain has issued more than 48 million shares, including nearly 500,000 to retail investors, at a price of £13.22 each, representing a 6.9 per cent discount to yesterday’s closing price.
Hold shares were down 10.2 percent in early trading to £11.87.
The decline broadly reflects the 8.3 percent of share capital represented by new shares issued to investors during the placement.
Entain shares plummeted after Ladbrokes owner revealed he had raised around £600 million from investors to fund takeover of Polish sports betting company
Entain announced its acquisition of STS late on Tuesday, with the FTSE 100 group valuing the Polish company PLN 24.80 (£4.74) per share.
Mateusz Juroszek, CEO of STS, and his father Zbigniew Juroszek, who together own approximately 70 percent of the company’s share, agreed to accept the offer and reinvest part of their proceeds into Entain’s operations in Midden – and Eastern Europe in exchange for a 10 percent stake.
The net cash consideration of the acquisition to be paid by Entain will be approximately £450 million. The remaining money from the fundraiser will be used to help fund future deals.
STS is the largest sports betting provider in Poland with almost 800,000 active users by the end of 2022 and 400 stores. In 2022, it achieved adjusted pre-adverse earnings of around £50 million.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: ‘Strategically, the deal makes sense, continues expansion into high-growth regions and leverages many of Entain’s existing capabilities.
“Price is a tricky issue, and potential cost synergies of £10m in the grand scheme of things are pretty meager. The total cost of £750m values STS at 11 times expected cash profit…that will fall below 10 if the synergies materialize – but still that is likely higher than Entain’s current valuation.
“There will be enough pressure to make this work.”
It comes at a time of expansion for Entain, which followed up last year’s €600 million acquisition of Croatia’s largest bookmaker with its £128 million acquisition of Israeli sports data provider 365scores in April.
Entain is bracing for a ‘substantial financial penalty’ following an investigation by HM Revenue and Customs into the gambling group’s business practices in Turkey.
Nevertheless, Entain praised a ‘strong start’ to the year with ‘record’ customer numbers as the gambling giant was supported by US gamblers during the Super Bowl and March Madness.
Briztzman added, “As I write this, stocks are now trading below the price paid by those involved in the capital raise, so any investor looking to get their piece of the pie back has a more attractive entry point.”