Kindred makes £176m offer for 32Red

Kindred makes £176m offer for 32Red

Thursday, February 23, 2017 Posted by Scott Longley
Offer recommended by 32Red board

Kindred Group has made a recommended 196p-a-share offer for 32Red in a deal which bolsters its positioning in the UK as the consolidation trend within the online gambling space continues to gather pace.

The offer values the Aim-listed 32Red, which was formed in 2002, at £176m and represents a premium of over 16 percent on the closing share price yesterday.

In its last trading statement issued in mid-February, 32Red said net gaming revenues for 2016 would come in at £62.3m, representing a 28 percent rise on 2015. Analysts at house broker Numis forecast that EBITDA for the year will be £9.8m. The company also noted that its Italian operations had moved into profitable territory for the first time.

Chief executive at Kindred (formerly Unibet) Henrik Tjarnstrom said the acquisition was in line with his company’s multi-brand strategy. “32Red is a high quality, customer-focused business with a similar culture to Kindred Group’s,” he added.

The buyout will be funded via a new senior debt facility provided by Svedbank.

Simon French, analyst at Cenkos, noted that it is unclear at this stage whether Ed Ware, 32 Red’s founder and 23 percent shareholder, will remain with the company post acquisition. He added that the acquisition continues the M&A theme so prevalent in the online gambling market over the last 18 months and follows the more recent proposed acquisition of NetPlay TV by Betsson.

“Once (the UK’s) DCMS (Department of Culture, Media and Sport) has completed its review of machines stakes, prizes and allocations along with its review of advertising and social responsibility we expect M&A to accelerate further,” he added.

Kindred Group has itself been involved in recent merger activity having bought Stan James in July 2015 for £19m.

The press release for the deal said that acceptances equivalent to 71 percent of the 32Red shareholder base have been received. Paul Leyland, partner at Regulus Partners, said the bid is highly likely to succeed unless a bidding battle opens up. He pointed out that as both companies operate on the Microgaming casino backend, there is little execution risk and some likely cost synergies and it will bolster Kindred’s to-date sub-scale positioning in the UK.

“The fit is therefore attractive geographically, strategically and operationally, in our view,” he added. “It also demonstrates two further key themes: largely .com operators are logically using cash and cash flow to buy into regulated markets, and; medium-sized businesses are increasingly struggling to see an organic future.”

Totally Gaming says: The latest slice of M&A points once again to the UK being a key battleground. This is a good bit of business all round; Kindred gets a greater foothold in the UK casino market, and 32Red’s shareholders get a good price for a business which although growing was comparatively sub-scale on its own. Key to the continued progression at 32Red will be how much of the talent that have driven the company’s marketing and retention activities in the past few years remains post-acquisition.


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