32Red has agreed an all cash takeover by Kindred, at 196p per share. Together with an approved 4p dividend, this represents a 32.4% premium to last month’s average. This equates to 10.6x EV/EBITDA and 14.3x P/E for 2017, a small premium to the larger peer group. Given 32Red’s brand strength, regulated bias and growth momentum, this appears justified.
Kindred Group is a pure online gaming operator with a strategy of entering only regulated or soon-to-be regulated markets. It is domiciled in Malta and its core markets are the Nordic Region and Western Europe. 32Red’s revenues would add c 10% to the enlarged group, increasing total regulated revenues from 35% to 39%. The deal will lead to further scale in the UK, and the ability to leverage 32Red’s brand strength, growth momentum and 3-4% share of the UK Casino Market.
With 71.1% of shareholder irrevocable undertakings already in place, we expect the deal to proceed according to plan, finalising by late April. Further updates will be provided along with 32Red’s 2016 results on 9 March.
Following the bid, 32Red’s shares have risen 16.3% to 200p, which comprises the 196p share offer, together with the 4p interim dividend, payable on 28 March. As we noted in our January update, 32Red’s share price previously appeared far too low, trading at 15% discount to the peer group. The acquisition multiples equate to 10.6x EV/EBITDA and 14.3x P/E for 2017, which appear far more appropriate.