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Live casino giant Evolution Gaming is pursuing a $2.3 billion deal to acquire all shares of rival gaming provider Netent.
NetEnt shareholders indicated early Wednesday that they will approve the offer, which marked a 43% premium to NetEnt’s share price at close on Tuesday. The seven-figure price tag is equivalent to 10x NetEnt FY20 revenue and 23x EBITDA, based on annualized Q1 numbers.
Existing NetEnt shareholders will be paid in stock of the combined company.
Evolution said the takeover would accelerate its move towards becoming the “world leader in the online gaming industry.” The Stockholm-listed company is already the market leader in live casino, and in NetEnt acquires one of the world’s largest online slots suppliers.
The two companies also suggested the combination would propel them to a leading role in the US online casino market.
Evolution chairman Jens von Bahr said: “NetEnt’s established US positioning combined with Evolution’s existing US studios and first-to-regulated-market strategy will put us in a favourable position to capitalize on the ongoing regulation in North America.”
Both firms posted strong US growth in Q1.
The deal is expected to close on Nov. 2, with annual synergies of $34 million thereafter.
However Evolution said the primary benefit would be through revenue synergies rather than cost-cutting. The company does not foresee any “essential changes” to the combined workforce.
“With this deal, there are unique possibilities to shape a leading global B2B provider of online casino, taking advantage of the market development with continued digitalization and strong growth, especially in North America,” said Mathias Hedlund, NetEnt chairman.
“Evolution’s position within Live Casino combined with NetEnt’s position within online slots will create a company well positioned to take significant market share.
Evolution was worth nearly $11 billion before the acquisition plans were announced. Shares, however, dipped 9% on today’s news.
London-based analyst Regulus Partners suggested the deal could “dilute” Evolution’s focus on its core live casino business
“We have written several times that the strongest gambling companies, whether B2B or B2C, are typically very good at just one thing,” Regulus said. “And the operational dexterity needed for effective multi-tasking has historically eluded the sector.”
The deal also continues the online gambling sector’s rush to consolidation. NetEnt itself acquired online slot supplier Red Tiger Gaming last year to kickstart faltering revenue growth.