European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 1 March, <a href="https://www.smartkarma.com/entities/entain-plc" target="_blank" data-smartkarma-citation="entities:23926:1" rel="noopener">Entain (ENT LN)</a> <a href="https://www.prnewswire.com/sv/pressmeddelanden/entain-increases-the-offer-price-to-sek-53-in-cash-per-share-in-enlabs-838522676.html" target="_blank" rel="noopener">increased the offer price to SEK 53</a> per share in <a href="https://www.smartkarma.com/entities/enlabs-ab" target="_blank" data-smartkarma-citation="entities:31120:1" rel="noopener">Enlabs AB (NLAB SS)</a>,
<ul>
<li>from the previous offer of SEK 40 per share, which represents a 32.5% premium vs. the initial offer.</li>
<li>This represents c. 4.1x EV/Fwd Revenue, 14.0x EV/Fwd EBITDA and 17x P/Fwd EPS, in line with comps.</li>
<li>Irrevocable undertakings now represent 50.9%.</li>
<li>If Entain becomes the owner of more than 90% of the shares of Enlabs, Entain intends to initiate a compulsory acquisition procedure.</li>
</ul>
Acceptance period until 18 March. Provided that Entain announces that the conditions of the offer have been satisfied or waived by 23 March 2021, settlement is expected to commence on or around 30 March 2021. The transaction should be completed by the beginning of Q2.
Gross spread is 1.1%, c. 4.5% annually, assuming a maximum of three months to complete (it should be less), and the chances to complete are even higher now. Recommendation is LONG at the current trading levels (SEK 52.4).

On 1 March, Entain (ENT LN) increased the offer price to SEK 53 per share in Enlabs AB (NLAB SS),

from the previous offer of SEK 40 per share, which represents a 32.5% premium vs. the initial offer.
This represents c. 4.1x EV/Fwd Revenue, 14.0x EV/Fwd EBITDA and 17x P/Fwd EPS, in line with comps.
Irrevocable undertakings now represent 50.9%.
If Entain becomes the owner of more than 90% of the shares of Enlabs, Entain intends to initiate a compulsory acquisition procedure.

Acceptance period until 18 March. Provided that Entain announces that the conditions of the offer have been satisfied or waived by 23 March 2021, settlement is expected to commence on or around 30 March 2021. The transaction should be completed by the beginning of Q2.
Gross spread is 1.1%, c. 4.5% annually, assuming a maximum of three months to complete (it should be less), and the chances to complete are even higher now. Recommendation is LONG at the current trading levels (SEK 52.4).

<a href="https://www.smartkarma.com/entities/entain-plc" target="_blank" data-smartkarma-citation="entities:23926:1" rel="noopener">Entain (ENT LN)</a> (formerly GVC) made an offer to acquire <a href="https://www.smartkarma.com/entities/enlabs-ab" target="_blank" data-smartkarma-citation="entities:31120:1" rel="noopener">Enlabs AB (NLAB SS)</a> from a group of sellers for SEK 40 per share in cash on 7 January 2021.
<ul class="">
<li data-bind="visible: !isCollapsed(), html: content">It values Enlabs at around SEK 2,796.98 mn (c. £250 mn), for an implied EV of SEK 2,820.39 mn.</li>
<li data-bind="visible: !isCollapsed(), html: content">This represents c. 3.4x EV/Fwd Revenue, 14.3 EV/Fwd EBITDA and 17x P/Fwd EPS, in line with comps.</li>
</ul>
Enlabs shareholders holding in aggregate around 42.2% of the total number of Enlabs shares have irrevocably undertaken to accept the offer.  Minimum acceptance condition of 90% plus one share (necessary to squeeze out and delist). Entain therefore needs c. 82.7% of acceptances from the remaining shareholders, which is quite high.
Entain Entain is buying market share and a platform for expansion in the fast growing Baltic region and into Ukraine and Belarus.
By using EV/EBITDA median comps, the implied equity value is SEK 41.59 per share, 3.9% above Entain's offer. On this basis, the offer looks cheap, but not outrageous.
With 42.2% irrevocable undertakings, and no likely interlopers, the offer is highly likely to succeed.
<ul>
<li data-bind="visible: !isCollapsed(), html: content">The shares closed at SEK 40.8, 0.5% below the previous close, but still 2% above the offer price.</li>
<li data-bind="visible: !isCollapsed(), html: content">I would wait for the share price to weaken below the offer price before setting up the spread.</li>
</ul>
Entain is also very upbeat about their own trading statement (21 January).
(This Insight is labelled bearish as I do not see a trading opportunity until the share price of Enlabs drops below the offer price, a sweetened offer is not very likely, in my view).

Entain (ENT LN) (formerly GVC) made an offer to acquire Enlabs AB (NLAB SS) from a group of sellers for SEK 40 per share in cash on 7 January 2021.

It values Enlabs at around SEK 2,796.98 mn (c. £250 mn), for an implied EV of SEK 2,820.39 mn.
This represents c. 3.4x EV/Fwd Revenue, 14.3 EV/Fwd EBITDA and 17x P/Fwd EPS, in line with comps.

Enlabs shareholders holding in aggregate around 42.2% of the total number of Enlabs shares have irrevocably undertaken to accept the offer.  Minimum acceptance condition of 90% plus one share (necessary to squeeze out and delist). Entain therefore needs c. 82.7% of acceptances from the remaining shareholders, which is quite high.
Entain Entain is buying market share and a platform for expansion in the fast growing Baltic region and into Ukraine and Belarus.
By using EV/EBITDA median comps, the implied equity value is SEK 41.59 per share, 3.9% above Entain's offer. On this basis, the offer looks cheap, but not outrageous.
With 42.2% irrevocable undertakings, and no likely interlopers, the offer is highly likely to succeed.

The shares closed at SEK 40.8, 0.5% below the previous close, but still 2% above the offer price.
I would wait for the share price to weaken below the offer price before setting up the spread.

Entain is also very upbeat about their own trading statement (21 January).
(This Insight is labelled bearish as I do not see a trading opportunity until the share price of Enlabs drops below the offer price, a sweetened offer is not very likely, in my view).

Sweden

Enlabs AB provide online gaming services.

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