Entain has struck a deal to purchase Croatian market leader SuperSport in a deal that values the acquired company at €920m.
Entain will pay €600m in cash at completion to SuperSport owner and Czech investment firm EMMA Capital in return for an initial 75% stake in the business.
The operator will make a further contingent payment of approximately €90m to EMMA in early 2023, with the final figure based on SuperSport’s EBITDA performance for full-year 2022.
EMMA will then contribute its 25% stake in SuperSport to Entain CEE at an initial implied valuation of €200m, with the contingent payment implying an additional €30m.
The overall acquisition is expected to value SuperSport at €920m, which implies a transaction multiple of 9.6x 2022 EBITDA, or 9.1x 2022 fully synergised EBITDA.
Entain said the acquisition is expected to be mid-single digit earnings accretive in its first full year, with cost synergies of €5m per year expected to be delivered in full by 2024.
SuperSport has a 54% market share position in Croatia according to Entain, while 85% of its 2021 revenue came from online channels.
Entain CEO Jette Nygaard-Anderson: “We see Croatia as an exciting, dynamic country which Entain is perfectly positioned to expand from.”
Entain will finance the purchase through a €700m bridge loan from Deutsche Bank, Lloyds, Mediobanca, NatWest and Santander.
The deal, which is expected to complete in Q4 2022, will increase Entain’s pro-forma net debt to EBITDA leverage ratio in 2022 by 0.4x.
Entain CEO Jette Nygaard-Anderson said: “We are excited to create Entain CEE with EMMA to underpin our strategy across the CEE region, and to be acquiring the leading betting and gaming operator in the highly attractive, fully regulated Croatian market.
“By bringing together Entain’s global expertise and EMMA’s regional investment track record, we are creating a growth platform with considerable opportunity.”
The new Entain CEE platform will be led by current SuperSport CEO Radim Haluza, who added: “I am looking forward to joining with Entain and further building on the significant opportunity presented in this region.
“The prospect of leading Entain CEE to drive expansion in fully regulated markets is an exciting opportunity, and EMMA’s investment expertise combined with Entain’s world-class platform will give us the competitive edge in delivering on the CEE opportunity.”
Paul Leyland, analyst at strategic advisory business Regulus Partners, said SuperSport generates circa €200m in annual revenue on an EBITDA margin of 52%.
Regulus Partners’ Paul Leyland: “The key issue for us is that each CEE market remains uniquely different and complex, making cross-regional synergies evasive; operational execution is likely to be very demanding.”
Commentating on the deal for investors, Leyland added: “SuperSport needs to expand beyond Croatia but to do so may be dangerously dilutive to its focus and capabilities.
“Equally, given the Balkans is infamously a region of small, hyper-complicated countries, the ability to stitch local heroes together from a global head office presents equal but opposite challenges.
“Creating a mid-tier capital and management structure arguably balances scale, responsiveness and localisation. The key issue for us is that each CEE market remains uniquely different and complex, making cross-regional synergies evasive; operational execution is likely to be very demanding.
“Further, while ’emerging markets’ in some respects, most Balkan countries already have some of the highest gambling spend per capita and highest levels of betting-led channel shift globally, making secular growth difficult.
“Therefore, while we believe that Entain and EMMA are absolutely doing the right thing in terms of looking for an effective balance between scale and localisation, this is not the same as discovering an easy route to emerging market growth,” he concluded.
