Statement by the Independent Bid Committee of Enlabs AB in relation to the public offer from Entain
The Independent Bid Committee of Enlabs AB (“Enlabs” or the “Company”) recommends the shareholders to accept the public offer of SEK 40 in cash per share in Enlabs submitted by Entain plc, previously GVC Holdings plc, through its wholly-owned subsidiary Bwin Holdings (Malta) Limited (“Entain” or the “Offeror”).
This statement is made by the Independent Bid Committee of Enlabs pursuant to Rule II.19 of the Swedish Corporate Governance Board’s Takeover Rules for Certain Trading Platforms (the “Takeover Rules”).
Entain has today announced a public offer to the shareholders of Enlabs to tender all shares in the Company for a consideration of SEK 40 in cash per share in Enlabs (the “Offer”).
The total value of the Offer, based on all shares in Enlabs, corresponds to approximately SEK 2.8 billion. The Offer is fully financed through cash at hand. The acceptance period for the Offer is expected to commence on or around 21 January 2021 and expire on or around 18 February 2021, subject to any extensions.
Completion of the Offer is conditional upon customary conditions, including the Offer being accepted to such an extent that Entain becomes the owner of shares in Enlabs representing more than 90 percent of the total number of shares of the Company (on a fully diluted basis); no other party announcing an offer to acquire shares in Enlabs on terms more favourable to the shareholders of the Company than the Offer; as well as with respect to the Offer and the acquisition of Enlabs, receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, including from competition authorities and gaming authorities, in each case on terms which, in Entain’s opinion, are acceptable. Further information regarding the Offer is included in Entain’s press release, which is available at www.entaingroup.com.
Given that companies controlled by Niklas Braathen, who is Chairman of the Board of Directors of Enlabs, and Christian Haupt, who is a member of the Board of Directors of Enlabs, respectively, have entered into commitments to accept the Offer, an independent bid committee consisting of the remaining board members (the “Independent Bid Committee”) was appointed on 6 January 2021 and has since handled questions related to the Offer.
The Board of Directors of Enlabs has, at the written request from the Offeror, permitted the Offeror to carry out a limited confirmatory due diligence review of Enlabs in connection with the preparation of the Offer. In connection with such due diligence review, the Offeror received certain preliminary financial information regarding Enlabs’ performance during the fourth quarter 2020. Enlabs will announce such preliminary financial information in a separate press release.
The Independent Bid Committee’s recommendation
In its evaluation of the Offer, the Independent Bid Committee has taken a number of factors into account which they deem relevant, including, but not limited to, the Company’s present strategic and financial position, prevailing market conditions and the Company’s expected future development as well as opportunities and risks related thereto.
The Independent Bid Committee has also considered the in-depth analysis conducted by the Company’s financial advisor Carnegie Investment Bank AB (publ) in connection with the Offer.
In particular, the Independent Bid Committee has made the following considerations in connection with their recommendation:
1. Considerations regarding bid premium
The Offer represents a premium of 1.1 percent compared to the closing price of Enlabs’ shares on Nasdaq First North Growth Market on 5 January 2021, the last trading day before the announcement of the Offer. The Independent Bid Committee notes that such bid premium is below other announced bids on Nordic stock exchanges in recent time.
However, the Independent Bid Committee also notes that the Offer corresponds to a premium of 15.6 percent compared to the volume-weighted average share price of Enlabs’ shares on Nasdaq First North Growth Market during the last 90 trading days, 42.3 percent compared to the volume-weighted average share price of Enlabs’ shares on Nasdaq First North Growth Market during the last 180 trading days and 86.9 percent compared to the share price on 20 February 2020, which was the last trading day before the Board of Directors of Enlabs received the first indicative bid letter from Entain.
The Company has released two quarterly reports over the last 180 calendar days, both of which have been received well in the market. Enlabs has also launched and completed a mandatory public offer of Global Gaming 555 during the same period.
The Independent Bid Committee notes that trading in Enlabs’ share, as well as trading in shares of its sector peers, has been very volatile during the course of the last year, not least to short-term unforeseeable changes in regulations on the markets Enlabs and its peers are exposed to, primarily as a result of the covid-19 pandemic.
The Independent Bid Committee also notes that, for a period of time, the discussion in the media and among investors about an increased consolidation sector has remained intense and that Enlabs has been named as a potential takeover candidate. It is the opinion of the Independent Bid Committee that the Company’s share price has come to partially reflect the potential participation by the Company in such consolidation.
This has led the Independent Bid Committee to not only consider the bid premium based on the last closing price or an average calculated based on trading in recent weeks, but also bid premiums based on the trading during a longer period of time, as well as consider the offer price compared to the underlying value of the business, when evaluating the bid premium and the Offer overall.
Furthermore, the Independent Bid Committee has assessed the likelihood of another offeror making an offer to all Enlabs’ shareholders which is more favourable to the shareholders than the Offer, based on the Company’s and the Company’s financial advisors’ contacts with such potential offerors, and has come to the conclusion that such likelihood is low.
2. Market valuation of Enlabs
The Nordic iGaming market in general has experienced a poor development in recent years, resulting from a sector rotation, due to increasing ESG focus and a lack of Nordic institutions interested in investing into iGaming. While comparable companies in the Nordic market have had lackluster share price developments for the last two years, Enlabs has experienced a strong share price increase, where the share price has increased by more than 100 percent and clearly outperformed its Nordic iGaming operator peers.
Valuation wise, in terms of EV/EBIT, Enlabs traded at lower multiples than its Nordic iGaming operator peer group two years ago. Enlabs’ strong share price performance since then has resulted in a significant valuation increase, valuing the company at a premium to the Nordic iGaming operator peer group. Enlabs is currently trading at approximately 5x 2021E Sales and approximately 12x 2021E EBITDA on market consensus.
3. Risk assessment
The Independent Bid Committee has assessed the Company’s financial profile and future opportunities and considered these in light of the bid. In its assessment, the Independent Bid Committee has also considered the risks associated with the business and its ability to monetise these opportunities.
During 2020, the Company was heavily affected by the sudden shut-down of iGaming in one of its core markets due to Covid-19 (the Company’s physical betting shops in Latvia and Lithuania are closed since November 2020). It demonstrated the vulnerability of the Company as the Company generates a large part of its revenues from a small number of markets.
While the Independent Bid Committee sees further growth opportunities for the Company in its core markets, the year 2020 has made the Independent Bid Committee aware of the elevated risks associated with Company’s operations in only a few core markets.
Furthermore, in the mid- to long-term perspective when the underlying growth in its core markets will saturate, the Company may end up in a disadvantage versus its larger peers from a scalability perspective due to the limited size of the operations and limited total addressable markets.
4. Views of existing large shareholders
Certain shareholders, including Erlinghundra AB (wholly owned by the Braathen family) and Atletico Nordic B.V. (part-owned by Christian Haupt), who together hold 42.2 percent of the total number of shares and votes in Enlabs and who have a long ownership history and deep understanding of the Company's operations and future prospects, have entered into commitments to accept the Offer. The Independent Bid Committee has been informed that the undertakings are conditional only upon the Offer being declared unconditional by Entain not later than 17 May 2021.
5. Fairness opinion
The Independent Bid Committee has engaged Mangold to conduct a fairness opinion. Mangold’s opinion is that the offer is fair to the public shareholders of Enlabs from a financial point of view. The fairness opinion is attached to this press release.
6. Impact on the Company and its employees
Under the Takeover Rules, the Independent Bid Committee is required, on the basis of the Offeror’s statement in the announcement of the Offer, to present its opinion on the effects the implementation of the Offer may have on the Company, especially employment, and its view on the Offeror’s strategic plans for the Company and the impact these could be expected to have on employment and on the locations where the Company conducts its business. In its press release announcing the Offer, the Offeror states:
Entain believes that a combination with Enlabs would allow Enlabs to accelerate delivery of its ambitions both in terms of growth within its existing markets and successful expansion into adjacent markets, including Belarus and Ukraine. Leveraging the combined expertise across the enlarged group would deliver an enhanced proposition to Enlabs’ customers. In a highly competitive and regulated industry, Entain believes scale and diversification is essential to continue to create shareholder value. Entain places great value on Enlabs’ organization and, by leveraging Entain’s scale, proprietary technology, marketing skills and products, will drive further growth in order to create long-term positive effects for Enlabs employees and other stakeholders. Entain’s plans for the future business and general strategy do not currently include any material changes to Enlabs’ organization, management and employees, including their terms of employment, or to the locations of Enlabs’ operations.
The Independent Bid Committee assumes that this description is correct and has no reason to take a different view in this respect. Thus, it is the assessment of the Independent Bid Committee that the Offeror would be a good owner of the Company in the coming years, which has been taken into consideration in the decision on a recommendation.
Based on the above, the Independent Bid Committee recommends the shareholders in Enlabs to accept the Offer. The decision was taken with a unanimous vote.
This statement shall in all respects be governed by and construed in accordance with Swedish law. Disputes arising from this statement shall be settled exclusively by Swedish courts.
Carnegie Investment Bank AB (publ) is acting as financial adviser and Gernandt & Danielsson Advokatbyrå are acting as legal adviser to Enlabs in connection with the Offer.
Stockholm, 7 January 2021
The Independent Bid Committee
For more information please contact:
Peter Åström, Board of directors
[email protected] / +46 70-756 27 47
This disclosure contains information that ENLABS is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014) and the Takeover Rules. The information was submitted for publication, through the agency of the contact person, on 07-01-2021 08:30 CET.
ENLABS stands for Entertainment Laboratories. Enlabs is a company that creates entertainment through innovative thinking within iGaming. The corporate group has offices in Tallinn, Riga, Vilnius, Malta, Marbella, Minsk and Stockholm. The operating subsidiaries hold national licenses for their operations and the Group employs approximately 300 employees. Enlabs AB (NLAB) is listed at Nasdaq First North Growth Market with Redeye AB as Certified Adviser: [email protected], +46 (0)8 121 576 90.
For more information, visit enlabs.com