British private equity firm Bridgepoint makes a SEK9.19-billion bid for Cherry weeks before the reorganization of the Swedish gambling market
A consortium led by London-headquartered private equity investor Bridgepoint Advisers Limited has offered to acquire Swedish gambling group Cherry AB for SEK9.19 billion (approx. $1 billion, €893.9 million).
An independent committee has been set up to examine the bid. It recommended today that shareholders accept the consortium’s offer of SEK87 per share. The committee had to be set up because the company’s Chairman, Morten Klein, is part of the consortium that is bidding for the Swedish gambling company.
The bid is fully financed through a combination of equity provided by Bridgepoint and other participants in the consortium and debt financing provided by Ares Management Limited. The acceptance period for the bid is expected to begin on or around December 20, 2018 and to expire on or around January 23, 2019, subject to extensions.
Cherry AB is the second gambling company hailing from Sweden that has attracted international suitors over the past several months. Back in October, William Hill announced a cash offer for online gaming and betting operator Mr Green & Co. The British bookmaker said that the acquisition of its fellow operator would allow it to establish presence in new markets, increase its online and international revenue, and reduce its exposure to UK’s gambling market, among other things.
Upcoming Reorganization of the Swedish Gambling Market
The independent bid committee said in a statement from today that the upcoming regulation of the Scandinavian country’s gambling market “has led to an intensified discussion in the media and among investors about increased consolidation between market players, including companies such as Cherry.”
Following the reorganization of the market, the gambling industry will enter “a new phase characterized by higher maturity”, which will result in the market outlook for the upcoming year being less predictable. This, in turn, could result in “more volatile earnings” for Cherry, the bid committee said today.
In addition, reputable Swedish institutions have revealed that they would withdraw from the gambling sector following changed investment mandates and new sustainability directives. The independent bid committee said that it believes that would result in institutional capital for Sweden-listed online gambling companies would decrease. This would effectively make it more difficult for Cherry to effectively finance its business as a listed company.
Founded in 1963, Cherry has established itself as one of Sweden’s largest and longest-running gambling companies. It runs businesses in five core areas, with those being online gambling, casino games development, digital marketing, gaming technology, and restaurant casino.
The company will have to compete for a share of the Swedish gambling market from January 1, 2019, when the country’s new gambling law is set to take effect. The local gambling regulator, Lotteriinspektionen has so far issued licenses to 33 interested gambling companies. More operators are expected to be authorized to operate in Sweden’s newly regulated market in the coming weeks.
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