REG - Entain PLC - Formation of Entain CEE and SuperSport Acquisition

EntainAnnouncement

11/08/2022 07:00

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RNS Number : 6319V  Entain PLC  11 August 2022

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

11 August 2022

 

Entain plc

 

Formation of Entain CEE to drive expansion in Central and Eastern Europe and
the acquisition of SuperSport, the leading gaming and sportsbook operator in
Croatia

 

Entain plc (LSE: ENT), the global sports-betting, gaming and interactive
entertainment group ("Entain" or the "Group"), today announces it has
partnered with EMMA Capital ("EMMA"), a leading investment firm based in the
Czech Republic, to establish a new venture ("Entain CEE") to drive expansion
in Central and Eastern Europe ("CEE"). Entain will own 75% of the economic
rights in Entain CEE. Entain CEE will acquire the SuperSport Group
("SuperSport"), the leading gaming and sportsbook operator in Croatia from
EMMA (the "Acquisition").

 

Compelling Strategic Rationale

 

·  Central and Eastern Europe is a highly attractive growth market: The
c.€5.0bn(1) regulated CEE betting and gaming market provides a significant
opportunity for Entain and is expected to grow at least 10% per year through
2025. The CEE market is currently led by local operators who have often
struggled to scale or consolidate across the region, providing a compelling
opportunity for Entain with its industry leading capabilities.

·    Creation of a unique growth platform focused across CEE:  Entain is
creating an exciting platform in the region, which will be led by SuperSport's
CEO, Radim Haluza, who has significant experience across the region. The
combination of Entain's global scale, access to capital and content, EMMA's
regional knowledge and connectivity, alongside the expert local operational
knowledge of Radim and his team, makes Entain CEE uniquely positioned to
unlock the significant opportunity across the region. This bespoke structure
will allow Entain to join with further leading local operators through Entain
CEE to continue to grow this unique platform across the region.

·     SuperSport is the Croatian market leader: SuperSport has a leading
position in the region with a 54%(2) market share in the attractive and fully
regulated Croatian market. SuperSport's online focused sports betting and
iGaming offering is underpinned by its proprietary technology solution.
SuperSport has 70% brand awareness driven by key sponsorship agreements (such
as media, marketing and betting rights for all leagues of the Croatian
Football Federation for 2022-26), strategic partnerships and a highly active
social media presence.  85% of revenue in 2021 was online, alongside a
best-in-class retail offering with a proven omnichannel approach.

·    Highly attractive financial profile: SuperSport has consistently
delivered strong top line financial performance, with NGR CAGR of c.17%(3), a
sustainable EBITDA margin of c.52%(4) and cash conversion of 90%+(5). The
Acquisition is expected to be mid-single digit earnings accretive in its first
full year of ownership for Entain, with preliminary cost synergies of €5m
per year, expected to be delivered in full by 2024.

 

Consideration

Entain will pay the following to EMMA for 75% of the economic rights in
SuperSport:

·     €600m in cash at completion; and

·     A further contingent payment made to EMMA in early 2023 based on
SuperSport's EBITDA for the financial year ending 2022. This payment is
expected to be €90m.

EMMA will contribute their 25% stake in SuperSport to Entain CEE at an initial
implied valuation of €200m, with the contingent payment implying an
additional €30m value contributed by EMMA.

 

The Acquisition is expected to value SuperSport at €920m which implies a
transaction multiple of 9.6x 2022 EBITDA, or 9.1x 2022 fully synergised
EBITDA.(6)

 

EMMA is also entitled to enhanced dividends from completion to the end of
2024, which will be linked to the performance of SuperSport. It is expected
that the consideration plus enhanced dividends will imply a multiple of less
than 10x LTM SuperSport EBITDA at each stage.

 

The Acquisition will be financed through a €700m bridge loan from Deutsche
Bank, Lloyds, Mediobanca, NatWest, and Santander. The Acquisition will
increase Entain's pro-forma net debt to EBITDA leverage ratio in 2022 by 0.4x.
The Acquisition is expected to complete in Q4 2022 and is conditional upon
regulatory approvals.

 

There is an option on EMMA's stake that can be exercised 3 years from closing
by either party, giving Entain a path to 100% ownership.

 

Jette Nygaard-Anderson, Entain's CEO, commented: "We are excited to create
Entain CEE with EMMA to underpin our strategy across the CEE region, and to be
acquiring the leading betting and gaming operator in the highly attractive,
fully regulated Croatian market.  We see Croatia as an exciting, dynamic
country which Entain CEE is perfectly positioned to expand from - we are very
much looking forward to growing our business responsibly within the country
and the region. By bringing together Entain's global expertise and EMMA's
regional investment track record, we are creating a growth platform with
considerable opportunity.  Expansion across CEE is a core component of our
growth strategy, and we look forward to having Radim on board to help drive
this opportunity".

 

Pavel Horák, EMMA's Chief Investment Officer, commented: "EMMA is very happy
to be partnering with the leading global betting, gaming and interactive
entertainment business to unlock the opportunity posed by the CEE betting and
gaming market. We see the Entain CEE structure as a clear opportunity for
creating value for shareholders, and we look forward to working closely and
collaboratively with Entain".

 

Radim Haluza, SuperSport's CEO commented: "I am looking forward to joining
with Entain and further building on the significant opportunity presented in
this region.  The prospect of leading Entain CEE to drive expansion in fully
regulated markets is an exciting opportunity, and EMMA's investment expertise
combined with Entain's world-class platform will give us the competitive edge
in delivering on the CEE opportunity".

 

The Acquisition constitutes a Class 2 transaction for the purposes of the UK
Listing Rules. (7)

 

Notes

(1) Market size estimates via local intelligence / internal sources -
regulated markets only

(2) In H1 2021 by GGR

(3) For the period 2016-2021

(4) Average of EBITDA margins 2017-2021, adjusted for Entain accounting

(5) For the period 2019-2021

(6) Includes run-rate cost synergies of €5m

(7) For the purposes of LR 10.4.1 R (Notification of Class 2 transactions),
the gross assets and profits of EMMA Gamma Adriatic d.o.o. (a.k.a.
"SuperSport") were £256.5m and £65.0m respectively based on 2021 audited
accounts

 

Contact details

Entain plc

 Investor Relations - Entain plc                           investors@Entaingroup.com

 David Lloyd-Seed, Chief IR & Communications Officer       david.lloyd-seed@Entaingroup.com

 Davina Hobbs, Head of Investor Relations                  davina.hobbs@Entaingroup.com.com

 Callum Sims, IR Manager                                   callum.sims@Entaingroup.com.com

 Media - Entain plc                                        media@Entaingroup.com.com

 Lisa Attenborough, Head of Corporate Communications       lisa.attenborough@Entaingroup.com.com

Morgan Stanley (Sole Financial Adviser)

Laurence Hopkins

Tom Perry

Richard Brown

Tel: +44 (0) 20 7425 8000

 

Media - Powerscourt

Rob Greening / Nick Hayns / Sam Austrums

Tel: +44 (0) 20 7250 1446

Entain@powerscourt-group.com

LEI: 213800GNI3K45LQR8L28

About Entain plc

Entain plc (LSE: ENT) is a FTSE100 company and a leading global
sports-betting, gaming and interactive entertainment group, operating both
online and in the retail sector. The Group owns a comprehensive portfolio of
established brands; Sports Brands include bwin, Coral, Crystalbet, Eurobet,
Ladbrokes, Neds, Sportingbet and Sports Interaction; Gaming Brands include
CasinoClub, Foxy Bingo, Gala, GiocoDigitale, Ninja Casino, Optibet, Partypoker
and PartyCasino. The Group operates a proprietary platform across core product
verticals and in addition to its B2C operations provides services to a number
of third-party customers on a B2B basis.

The Group has a 50/50 joint venture, BetMGM, a leader in sports betting and
iGaming in the US. Entain provides the technology and capabilities which power
BetMGM as well as exclusive games and products, specially developed at its
in-house gaming studios. The Group is tax resident in the UK with operations
in over 30 regulated or regulating territories.  Entain is a leader in ESG, a
member of FTSE4Good, the DJSI and is AA rated by MSCI. The Group has set a
science-based target, committing to be carbon net zero by 2035 and through the
Entain Foundation supports a variety of initiatives, focusing on safer
gambling, grassroots sport, diversity in technology and community projects.

For more information see the Group's website: www.entaingroup.com

About SuperSport

SuperSport has a leading position in the region with a ~54%(4) market share in
an attractive, fully regulated Croatian market. SuperSport's online focused
sports betting and iGaming offering is underpinned by a brand which is
synonymous with betting in Croatia. SuperSport operates across three segments
covering betting services, a proprietary online casino platform, and operating
slot machines in betting shops via its subsidiary Puni Broj d.o.o ("Puni
Broj").  SuperSport also has its own in-house technology studio, Minus5 d.o.o
("Minus5"). SuperSport has delivered sustainable EBITDA margin of c.52%(6)
(FY17-21) and cash conversion of 90%+ (FY19-21). The business has an
experienced management team who has successfully grown the business and
transformed it into a fast-growing online operator over the last 6 years.
SuperSport is led by Radim Haluza, CEO, who has significant experience in
gaming across CEE, having previously served as CEO of Fortuna Entertainment
Group in the region.

 

Important notices

The person responsible for arranging for the release of this announcement on
behalf of Entain is Emily Carey (Company Secretary).

Certain statements in this announcement are forward-looking statements,
including with respect to Entain's expectations, intentions and projections
regarding its future performance, strategic initiatives, anticipated events or
trends and other matters that are not historical facts and which are, by their
nature, inherently predictive, speculative and involve risks and uncertainty
because they relate to events and depend on circumstances that may or may not
occur in the future. All statements that address expectations or projections
about the future, including statements about operating performance, strategic
initiatives, objectives, market position, industry trends, general economic
conditions, expected expenditures, expected cost savings and financial results
are forward‐looking statements. Any statements contained in this
announcement that are not statements of historical fact are, or may be deemed
to be, forward‐looking statements. These forward-looking statements, which
may use words such as "aim", "anticipate", "believe", "could", "intend",
"estimate", "expect", "may", "plan", "project" or words or terms of similar
meaning or the negative thereof, are not guarantees of future performance and
are subject to known and unknown risks and uncertainties. There are a number
of factors including, but not limited to, commercial, operational, economic
and financial factors, that could cause actual results, financial condition,
performance or achievements to differ materially from those expressed or
implied by these forward-looking statements. Many of these risks and
uncertainties relate to factors that are beyond Entain's ability to control or
estimate precisely, such as changes in taxation or fiscal policy, future
market conditions, currency fluctuations, the behaviour of other market
participants, the actions of governments or governmental regulators, or other
risk factors, such as changes in the political, social and regulatory
framework in which Entain operates or in economic or technological trends or
conditions, including inflation, recession and consumer confidence, on a
global, regional or national basis. Given those risks and uncertainties,
readers are cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements speak only as of the date of this
announcement. Entain and its affiliates, and any of its or their respective
directors, officers, partners, employees, advisers or agents
(collectively, "Representatives") expressly disclaim any obligation or
undertaking to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise unless
required to do so by applicable law or regulation.

In particular, no statement in this announcement is intended to be a profit
forecast or profit estimate and no statement of a financial metric (including
estimates of EBITDA, profit before tax, free cash flow or net debt) should be
interpreted to mean that any financial metric for the current or future
financial years would necessarily match or exceed the historical published
position of Entain and its subsidiaries. Certain statements in this
announcement may contain estimates. The estimates set out in this announcement
have been prepared based on numerous assumptions and forecasts, some of which
are outside of Entain's influence and/or control, and is therefore inherently
uncertain and there can be no guarantee or assurance that it will be correct.
The estimates have not been audited, reviewed, verified or subject to any
procedures by Entain's auditors. Undue reliance should not be placed on them
and there can be no guarantee or assurance that they will be correct.

This announcement is being issued by and is the sole responsibility of Entain.
No representation or warranty, express or implied, is or will be made as to,
or in relation to, and no responsibility or liability is or will be accepted
by or on behalf of Entain (apart from the responsibilities or liabilities that
may be imposed by the Financial Services and Markets Act 2000, as amended or
the regulatory regime established thereunder) or by its affiliates or any of
its Representatives as to, or in relation to, the accuracy, adequacy, fairness
or completeness of this announcement or any other written or oral information
made available to or publicly available to any interested party or its
advisers or any other statement made or purported to be made by or on behalf
of Entain or any of its affiliates or any of its Representatives in connection
with Entain and any responsibility and liability whether arising in tort,
contract or otherwise therefore is expressly disclaimed.

Morgan Stanley & Co. International plc ("Morgan Stanley"), which is
authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority in the
United Kingdom, is acting exclusively as financial adviser to Entain and no
one else in connection with the Acquisition. In connection with such matters,
Morgan Stanley, its affiliates and their respective directors, officers,
employees and agents will not regard any other person as their client, nor
will they be responsible to anyone other than Entain for providing the
protections afforded to clients of Morgan Stanley nor for providing advice in
connection with the Acquisition, the contents of this announcement or any
matter referred to herein.

 

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