Evolution Gets Go-Ahead From UK Competitions Authority to Close NetEnt Deal

The final approval

Online casino provider Evolution has received approval from the UK Competition and Markets Authority (CMA) for its planned acquisition of NetEnt.

CMA certification marks the last approval necessary before the deal is closed

The SEK19.6bn ($2.27bn) deal required approval from multiple regulatory authorities, including the CMA, Malta Gaming Authority (MGA), and Consumer Affairs Authority (CAA). After securing approval from both the MGA and CAA last month, the CMA certification marks the last approval necessary before the deal is closed.

As a result of the CMA investigation, Evolution extended the period for shareholders of NetEnt to accept its offer from October 30 to November 20. If necessary, the supplier is able to extend the acceptance period further. In a statement on its website, Evolution said it expects the deal to close around December 1, 2020.

Background of the acquisition

In June, Evolution announced plans to acquire NetEnt in an SEK19.6bn agreement. The proposed deal would see NetEnt shareholders sell their shares to Evolution at a value of SEK79.93 ($9.25) per share. The offer represents a premium of 43% over NetEnt’s closing price on the day the offer was made.

NetEnt’s Board of Directors advised shareholders to accept the deal

In a company statement, NetEnt’s Board of Directors advised shareholders to accept the deal, concluding that a merger was “the best current option” for the company. The Board described multiple strategic benefits to the merger. Among these was an ability to leverage the company’s strong position in the US and increase product diversification.

For the deal to close, Evolution must own more than 90% of NetEnt’s outstanding shares. As per the Swedish Companies Act, Evolution must then begin a mandatory buy-out procedure of the remaining shares.

NetEnt’s £220m ($290.1m) acquisition of gaming supplier Red Tiger Gaming in September 2019 is certainly a factor behind Evolution’s interest in the company. Commenting on the company’s Q4 2019 report, NetEnt CEO Therese Hillman said the Red Tiger acquisition had “exceeded expectations.” NetEnt posted record breaking revenue for its first full quarter after the acquisition, totaling SEK512m ($59.3m). Of this total, Red Tiger generated SEK96m ($11.1m).

Evolution and NetEnt’s 2020 performance

Both Evolution and NetEnt have seen growth during 2020, despite challenges posed by the COVID-19 pandemic across the globe.

Evolution’s revenue was up 48% year-on-year

For Q3 2020, Evolution’s revenue was up 48% year-on-year, to a total of €140m ($165.8m). Profit for the quarter was €79.4m ($94m), an increase of 100% from 2019 levels, while EBITDA totalled €90.7m ($107.4m), up 87%. Evolution CEO Martin Carlesund described the quarter as “a period of exceptionally high activity operationally.” The quarter saw Evolution go live in Pennsylvania in the US and Kaunas in Lithuania.

Meanwhile, NetEnt saw a year-on-year revenue increase of 18% to a total of SEK521m ($60.3m) for the third quarter. For the first nine months of 2019, NetEnt’s revenue was SEK1.6bn ($185.2m), a 33% increase year-on-year. Much like Evolution, it was a period of expansion for NetEnt, as it signed supply deals with both DraftKings and William Hill in the US.

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