Entain PLC (LON:ENT) has upped its profit guidance for the current year and unveiled plans to acquire Swedish gambling group Enlabs, which operates online sports betting and gaming brands across the Baltic region.
The FTSE 100-listed owner of Ladbrokes and Coral said it has made a recommended cash offer of around 40 Swedish Krona (360p) for each Enlabs share, valuing the company at around 2.8bn Krona (£250mln) which will be funded from existing cash resources.
The offer represents a premium of around 15.6% compared to the volume-weighted average price of an Enlabs share during the last 90 trading days before the announcement.
Shareholders owning 42.2% of Enlabs shares have undertaken to accept the offer, Entain said, with the purchase expected to complete before the end of March and be earnings accretive in Entain’s first full year of ownership.
Swedish analysts expect Enlabs to generate earnings (EBITDA) of €23.5mln (£21.1mln) from net gaming revenue of €89.5mln (£80.5mln) for the 2021 calendar year.
Entain also gave an update on its own performance, saying that following “continued strong performance” through the final quarter of 2020 and despite the impact of lockdowns on its bookmaker's shops, it expects EBITDA for 2020 to be between £825-£845mln, a 6-8% increase on its guidance form the third quarter.
"The acquisition of Enlabs is perfectly aligned with our strategy of expanding across new regulated international markets,” said Entain chief executive Shay Segev in the statement, especially highlighting the growth opportunities from both its existing markets and through new market opportunities.
“Enlabs is already a strong and rapidly growing business in its own right, but we now have a fantastic opportunity to turbocharge its growth by leveraging the power of our unparalleled proprietary technology, scale, product and marketing expertise," he added.
In a note on Thursday, analysts at Peel Hunt upped their target price for Entain to 1,800p from 1,600p and retained their ‘buy’ rating, saying the Enlabs acquisition was “a useful progression of strategy” and the company is “likely to benefit overall from further lockdowns in its key markets in early 2021 despite the requirement to close retail venues”.
The broker also said the probability of an eventual merger with Entain’s US partner MGM Resorts International (NYSE:MGM), despite being rebuffed by the company earlier this week, will “underpin the share price from here and, we believe, offset some of the risks from UK regulation on the horizon”.
Entain shares were up 0.7% at 1,470p in mid-morning trading.
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