(Bloomberg) -- British betting firm Entain Plc is pursuing a takeover of Olympic Entertainment Group, one of the Baltic region’s largest gambling companies, people with knowledge of the matter said.
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Entain made an indicative cash offer in recent weeks of more than $1 billion for the Estonian company, which runs casinos and online gambling sites in the region, according to the people, who asked not to be identified because the information is private. Shares of Entain were down 1.6% at the close Friday in London, ending the day at the lowest level in about two months.
Olympic is one of the few remaining assets from the portfolio of London-based Novalpina Capital, which owns NSO Group, developer of the controversial Pegasus spyware tool that’s come under fire for its use by autocratic governments to spy on journalists and activists.
The private equity firm collapsed earlier this year amid a fight between its three founders, and its investors voted to move management of the fund’s remaining holdings to Berkeley Research Group.
A sale could help backers of the former Novalpina fund recoup all of their investment with a profit, the people said. That’s even before it sells its other remaining holdings: NSO, French specialty pharmaceutical company Laboratoire XO and a debt portfolio.
Deliberations are ongoing, and there’s no certainty they will result in a transaction, the people said. A representative for Entain declined to comment. Spokespeople for Olympic and Berkeley Research Group couldn’t immediately be reached for comment.
Entain acquired Swedish gaming company Enlabs AB earlier this year to expand in the Baltics and could achieve cost savings through a further deal in the region.
Olympic has operations in countries including Estonia, Latvia, Lithuania, Slovakia and Italy. The company, which Novalpina bought in 2018 for about 288 million euros ($325 million), has grown through acquisitions that helped it expand in markets including Romania and Croatia.
It runs online gambling sites under the OlyBet and MaxBet brands and owns more than 100 casinos as of the end of 2020, according to Olympic’s website. The company’s properties include the Olympic Voodoo Casino in the Latvian capital of Riga, which it says is the largest in the Baltics. It’s also the official betting partner of the U.S. National Basketball Association in several markets.
The total price tag from Entain’s proposal includes an upfront payment to acquire Olympic’s online business and operations in Lithuania and Croatia, as well as an additional earnout to be paid in early 2023 depending on performance, the people said.
Entain is also seeking an option to buy Olympic’s remaining operations in other countries in early 2023, according to the people. It offered to inject liquidity into that part of the business before it buys those assets, in return for concessions from bondholders including an extension of the debt maturity, they said.
A deal would add to an ongoing frenzy of consolidation among betting firms. Gambling software developer Playtech Plc is currently the target of a potential bidding war. Entain has itself been the target of two takeover attempts. DraftKings Inc. walked away from a potential $22.4 billion deal last month and MGM Resorts International had tried to buy Entain earlier this year for $11 billion.
Entain is a serial acquirer. The company, formerly known as GVC Holdings Plc, was built up through deals including the takeover of Ladbrokes Coral Group Plc agreed in 2017 and the purchase of Bwin.party Digital Entertainment Plc signed in 2015.
Olympic has sold 200 million euros of senior secured notes through its financing vehicle Odyssey Europe Holdco Sarl, according to data compiled by Bloomberg. In July last year, Moody’s Investors Service cut its credit ratings by two notches to Caa2, citing an “aggressive financial policy” and corporate governance concerns. The company paid a dividend to its owners at the peak of the coronavirus crisis using funds previously earmarked for an acquisition, according to Moody’s.
It also transferred its online business last year to its ultimate parent company, outside the control of debtholders. The move was technically allowed by terms of the notes but took one of the fastest-growing parts of Olympic’s business out of bond investors’ purview, and Moody’s raised questions about how the assets were valued in the reorganization.
(Updates with share move in second paragraph)
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