Details of the acquisition
The sale will take place on a cash free, debt free basis, and will consist of initial consideration of €24m, to be followed by a further potential earn-out of up to €4.25m payable in 2024 upon completion of the subsidiary’s 2023 audited financial results.
888 said it intends to use the proceeds for general corporate purposes.
Under the agreement, 888 will provide Paf with a brand licence for the continued usage of the Mr Green and William Hill brands, for a limited period.
The Latvian business already operates largely as an independent entity, 888 said, with its own management team and a separate technology platform from the rest of the group.
As such, the transaction is expected to have no impact on 888’s ongoing operations and synergy programme, and is consistent with its strategy to focus on core and growth market plans, it added.
Completion of the transaction is expected to occur “in the coming weeks,” but is conditional upon the carve-out of the Latvian subsidiary from 888’s existing supplier contracts and its incorporation into Paf’s contracts, as well as certain change of control consents and the payment of a dividend by the Latvian business.In 2022, 888’s Latvian business generated net revenue of £9.1m and EBITDA of £2.5m. On the company’s 31 December 2022 balance sheet, the value of the gross assets subject to the transaction was determined to be approximately £9.3m.
“We continually review our asset base to ensure that we are only holding assets that both contribute to our long-term strategy and will maximise value for our shareholders,” said 888 executive chair Lord Mendelsohn.
“As a business, our relatively limited exposure in the Baltic region means that the region is not one of our core or growth markets where we prioritise our investments.
“The Latvian business is a high-quality, locally regulated business, with an excellent team that has built a strong market position. I would like to express my sincere thanks to the team for their dedication during their time with the group and I am highly confident that under new ownership with Paf, the business will continue to flourish.”
Co-founder of the Latvian subsidiary and head of its board, Janis Tregers, added: “We launched in 2012 as 11.lv, and in 10 years, have built a market-leading position in Latvia, with over 10% market share.
“In 2018, we sold 75% of the business to Mr Green at an enterprise value of €3.7m, and this transaction to sell the entire business for a valuation of up to €28m reflects the hard work of our team across the business resulting in significant value creation.
“Under the new ownership with Paf, I am confident that the business will continue to go from strength to strength, delivering great products and experiences for our customers.”
Finally, Paf CEO Christer Fahlstedt said: “We are thrilled to get the opportunity to continue to build on a great Latvian success story. With a long-term perspective, we are convinced that the Latvian market is moving in the direction of increased player protection and thereby a great strategic fit for Paf.”