Shares in Ladbrokes owner Entain (ENT), formerly known as GVC, added 1% to £14.76 on Thursday - some 7% higher than MGM Resorts' offer on Monday - after the company announced an agreed all cash offer of £250 million for Enlabs AB and raised its full year earnings guidance.
Swedish-listed Enlabs AB is the market leader in Latvia, number two in Estonia and a top five player in Lithuania. Last year Enlabs acquired Global Gaming, giving it access to the Nordic markets.
SOLID STRATEGIC RATIONALE
Analysts see today’s bolt-on acquisition as a continuation of Entain’s growth strategy to leverage its proprietary platform by entering regulated local markets to broaden its geographical reach.
As such the deal is ‘business as usual’ for Entain and not simply designed to thwart the unexpected approach from its US partner. Moreover, the acquisition is expected to be earnings enhancing in the first year of ownership.
The prospect of Entain falling into US ownership hasn’t deterred Enlabs chief executive Niklas Braathen, who intends to invest €15 million in Entain shares within four months of receiving funds from the sale and will stay on board to help the business expand into new markets.
INCREASED EARNINGS GUIDANCE
Meanwhile, management has increased its forecast for full year earnings before interest, taxes, depreciation and amortisation (EBITDA) by 6%-to-8% from its November guidance to a range of £825 million to £845 million.
This compares with a consensus estimate of £774.4 million according to data from Refinitiv, suggesting more upgrades to come from analysts.
Net debt to EBITDA for the year end to 31 December 2020 is expected to be approximately 2.1 times.
Greg Johnson at Shore Capital said this suggested that momentum in digital, which grew 28% in the third quarter, had continued into the end of the year.
‘We see upside risk to our EBITDA estimate of £837m, which includes the impact of regulatory changes in Germany', Johnson added.
