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French lottery operator La Française des Jeux (FDJ) has made a takeover bid to acquire Stockholm-listed Kindred Group.

If approved, the deal will create the second-largest operator in Europe’s gaming sector, according to FDJ.

FDJ has set the offer price at SEK130 per share of Kindred, presenting a 24% premium over the closing price on 19 January and a 35% premium compared to the weighted average price of the last 30 trading days.

FDJ has offered approximately SEK27.95bn (€2.45bn) for the business, which translates to an enterprise value of €2.6bn for Kindred.

Kindred’s board unanimously recommends that shareholders accept the offer.

Moreover, Kindred shareholders Corvex Management LP, Premier Investissement SAS, Eminence Capital, Veralda Investment and Nordea Bank Abp — together holding 27.9% of the capital — have agreed to the offer.

Yesterday evening (22 January), Kindred already confirmed the bid following a report by the Wall Street Journal.

Management commentary

“I am pleased to announce today the proposed acquisition of Kindred,” said FDJ chairperson and CEO Stéphane Pallez.

“The combination will result in a stronger strategic positioning and significant value creation for the benefit of our shareholders and broader stakeholders” she added.

FDJ said the combined group will only operate in markets that are locally regulated or in the process of regulating.

Kindred CEO Nils Andén added: “By partnering with FDJ, I am convinced that Kindred will be able to accelerate the implementation of long-term strategic projects, continue its growth in its main markets and offer its customers a trusted source of entertainment.

“This will also allow us to accelerate our progress towards revenue coming entirely from locally regulated markets,” he stressed.

“The most attractive outcome”

In April 2023, Kindred initiated a strategic review to explore alternatives for the company in order to maximise shareholder value.

As part of this process, the board explored a multitude of options, including operational initiatives, a merger or sale of the company, and other possible strategic transactions.

Kindred said it has attracted interests from several parties.

The group said that “following careful and exhaustive evaluation of alternative options, including standalone long-term growth prospects of Kindred, that the offer represents the most attractive outcome for shareholders of Kindred.”

Kindred added that the offer, given the cash consideration, provides an opportunity for shareholders to realise value in the near future at a meaningful premium to the current and pre-review share prices.

The board took into account the competitive market risks and potential impacts of regulatory changes in the company’s locally regulated and dot com markets, “which alone or in combination” can cause deviations in actual revenue growth or underlying profitability from the forecasted figures.

Kindred added that, according to a fairness opinion from Jefferies, the offer price is fair to Kindred’s shareholders from a financial point of view.

Impact on Kindred operations

Kindred also stated that FDJ does not plan to materially alter Kindred’s operations, except for exiting the Norwegian market and non-regulated markets without a clear path to regulation.

Kindred was embroiled in a year-long legal battle with the Norwegian Gambling Authority (NGA) in an effort to challenge the country’s gambling monopoly.

In 2019, the NGA banned Kindred operating subsidiary Trannel International from offering its services to Norwegian consumers and later imposed a compulsory daily fine of €116,676.

However, in June 2023, Kindred lost its appeal case against the NGA, which then demanded that the operator exit the market. The battle is still ongoing, but FDJ has committed to withdrawing from all non-locally regulated markets should the acquisition proceed.

This withdrawal strategy is likely to have a negative impact on Kindred financials of around £250m for full-year 2024, or £200m when excluding the US, Norway and dot com markets.

More to follow...

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