Shares in Ladbrokes owner Entain slide on deal to buy Poland's STS (updated)

Sts Holding SA

14/06/2023 10:55

(Adds comments, background)
    By Joice Alves
       LONDON, June 14 (Reuters) - 
    Shares of Ladbrokes owner Entain  ENT.L  fell to the bottom
of the London blue-chip index  .FTSE  on Wednesday after the
company announced it was buying Poland-based sports betting
operator STS Holdings  STH1.WA .
    Entain shares fell 10.5% to their lowest since March 29, in
their biggest daily decline in four months as analysts picked
through the deal valuation. 
    After the European market close on Tuesday, the
sports-betting and gaming company said it will pay 24.8 Polish
zlotys ($5.97) for each STS shares in a 750 million pounds ($946
million) deal, which will expand its reach in Europe.
    "Strategically the deal makes sense, it continues the
expansion into fast-growing regions and leverages many of
Entain’s existing capabilities. The price is a sticky point,"
said Matt Britzman, equity analyst at Hargreaves Lansdown.
        Entain, which owns Coral betting shops as well as the
bwin and partypoker online brands, also announced on Wednesday
it had raised around 
    600 million
     in equity issuance to help pay for the acquisition. 
  
        According to analysts, the deal valued STS at almost 11
times its expected cash profit (EBITDA).
  
        Entain said its Central and Eastern Europe venture,
Entain CEE, and partner EMMA Capital, will fund the STS offer in
proportion to their ownership in Entain CEE - about 75% and 25%,
respectively. 
  
        "Management expects the deal to be earnings accretive in
the first full year, including impact of the equity raise; we
estimate low single digit," Citi said in a note. "Some investors
may question capital being allocated into such deals." 
  
        STS, founded in 1997, is the one of the largest
bookmakers in Poland and has licences to operate in the UK and
Estonia. Its shares surged to December 2021 high, last up 12.3%.
  
        
  
        
  

 (Reporting by Joice Alves; Editing by Amanda Cooper and Louise
Heavens)
 ((Joice.Alves@thomsonreuters.com; Twitter @joiceal;))