LONDON, UK: Entain plc (LSE: ENT) has partnered with EMMA Capital to establish a new venture (Entain CEE) to drive expansion in Central and Eastern Europe.

Entain will own 75% of the economic rights in Entain CEE. Entain CEE will acquire the SuperSport Group, the leading gaming and sportsbook operator in Croatia from EMMA.

The consideration for 75% of the economic rights in SuperSport comprises €600 million in cash at completion; and a further contingent payment made to EMMA in early 2023 based on SuperSport’s EBITDA for the financial year ending 2022. This payment is expected to be €90 million.

Compelling Strategic Rationale

·  Central and Eastern Europe is a highly attractive growth market: The c.€5.0bn regulated CEE betting and gaming market provides a significant opportunity for Entain and is expected to grow at least 10% per year through 2025. The CEE market is currently led by local operators who have often struggled to scale or consolidate across the region, providing a compelling opportunity for Entain with its industry leading capabilities.

·    Creation of a unique growth platform focused across CEE: Entain is creating an exciting platform in the region, which will be led by SuperSport’s CEO, Radim Haluza, who has significant experience across the region. The combination of Entain’s global scale, access to capital and content, EMMA’s regional knowledge and connectivity, alongside the expert local operational knowledge of Radim and his team, makes Entain CEE uniquely positioned to unlock the significant opportunity across the region. This bespoke structure will allow Entain to join with further leading local operators through Entain CEE to continue to grow this unique platform across the region. 

·     SuperSport is the Croatian market leader: SuperSport has a leading position in the region with a 54% market share in the attractive and fully regulated Croatian market. SuperSport’s online focused sports betting and iGaming offering is underpinned by its proprietary technology solution. SuperSport has 70% brand awareness driven by key sponsorship agreements (such as media, marketing and betting rights for all leagues of the Croatian Football Federation for 2022-26), strategic partnerships and a highly active social media presence. 85% of revenue in 2021 was online, alongside a best-in-class retail offering with a proven omnichannel approach. 

·    Highly attractive financial profile: SuperSport has consistently delivered strong top line financial performance, with NGR CAGR of c.17%, a sustainable EBITDA margin of c.52% and cash conversion of 90%+. The Acquisition is expected to be mid-single digit earnings accretive in its first full year of ownership for Entain, with preliminary cost synergies of €5m per year, expected to be delivered in full by 2024.

EMMA will contribute their 25% stake in SuperSport to Entain CEE at an initial implied valuation of €200m, with the contingent payment implying an additional €30m value contributed by EMMA.

The 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.

EMMA is also entitled to enhanced dividends from completion to the end of 2024, which will be linked to the performance of SuperSport. It is expected that the consideration plus enhanced dividends will imply a multiple of less than 10x LTM SuperSport EBITDA at each stage.

The Acquisition will be financed through a €700m bridge loan from Deutsche Bank, Lloyds, Mediobanca, NatWest, and Santander. The Acquisition will increase Entain’s pro-forma net debt to EBITDA leverage ratio in 2022 by 0.4x. The Acquisition is expected to complete in Q4 2022 and is conditional upon regulatory approvals.

There is an option on EMMA’s stake that can be exercised 3 years from closing by either party, giving Entain a path to 100% ownership.

Jette Nygaard-Anderson, Entain’s CEO, commented: “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. We see Croatia as an exciting, dynamic country which Entain CEE is perfectly positioned to expand from – we are very much looking forward to growing our business responsibly within the country and the region. By bringing together Entain’s global expertise and EMMA’s regional investment track record, we are creating a growth platform with considerable opportunity. Expansion across CEE is a core component of our growth strategy, and we look forward to having Radim on board to help drive this opportunity”.

Pavel Horák, EMMA’s Chief Investment Officer, commented: “EMMA is very happy to be partnering with the leading global betting, gaming and interactive entertainment business to unlock the opportunity posed by the CEE betting and gaming market. We see the Entain CEE structure as a clear opportunity for creating value for shareholders, and we look forward to working closely and collaboratively with Entain”.

Radim Haluza, SuperSport’s CEO commented: “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”.