indred will pay 196 pence a share for the owner of the Roxy Palace online casino brand, 16 percent above the latest closing price for 32Red, whose shares had surged in the last three weeks on takeover speculation. The debt-funded offer is 40 percent more than the average price in the last three months, Kindred said in a statement Thursday.
The takeover continues a surge of merger-and-acquisition activity across the gaming sector, where companies need additional scale to meet an increasing burden of tax and regulation. Kindred hasn’t done a deal since acquiring the online gambling business of Stan James in 2015. In 32Red, the Swedish company is gaining a business that’s long been regarded as a potential bid target.
“At first glance, this deal does seem to make strategic and financial sense,” David Jennings, an analyst at Davy Stockbrokers, said in a note. “We expect to see further consolidation in the gaming space this year based around the same types of motive that have driven this deal, namely scope to build scale, diversify regulatory risk and improve efficiency.”
32Red shares rose 16 percent to 200 pence in early London trading, matching the value of the offer and a dividend of 4 pence a share to which shareholders are entitled. Kindred gained 2.3 percent to 85.45 kronor ($9.52) in Stockholm.
The takeover is already close to a done deal, with shareholders owning about 71 percent of 32Red’s stock having given irrevocable undertakings to accept the offer. With the exception of one investor owning 2.8 percent of the stock, all those undertakings will remain in place even in the event of a counter bid. The offer is conditional upon Kindred gaining acceptances of 75 percent.
“We’re optimistic we will be over 75 percent in a short space of time,” Kindred Group Chief Executive Officer Henrik Tjaernstroem said on a conference call. He declined to comment on whether 32Red had attracted rival interest, though the U.K. company’s CEO Ed Ware said such a business “is always of interest to lots of people.”
Ware declined to comment on whether he will remain with the business after the takeover.