British private equity firm Bridgepoint is leading a consortium seeking a $1 billion (9.19 billion Swedish crowns) takeover of the Swedish gaming company Cherry AB. The offer was revealed by Cherry this week. An independent committee will examine the bid recommended, where shareholders will be provided an offer to accept 87 crowns per share. The independent committee is necessary to oversee the decision as Cherry Chairman Morten Klein is a part of the consortium bidding or the takeover.
Cherry shares, trading on Nasdaq Stockholm jumped 18.3 percent post the news revealed. They are currently trading at 85.8 crowns, hovering below the record highs it touched in November. Established in 1963, the company is primarily operating in five business areas- Restaurant Casino, Gaming technology, online marketing, game development, and online gaming. It is one of the biggest and oldest running gambling companies in the country.
The bid committee statement suggests that the upcoming Swedish gambling market regulations could make earnings volatile. It said that a number of Swedish institutions are moving away from the sector due to the revised investment mandates and new sustainability directives. As institutional capital moves away from the gambling market, Cherry will have a hard time financing its business as usual. As the market moves towards higher maturity, it is likely that the upcoming year will be less predictable for the operators.
Bridgepoint partner Mika Herold said that Cherry’s challenges and opportunities could be better faced in a private setting with a more advantageous capital structure. The bid committee also highlighted media speculations about a possible consolidation of online gambling companies.
Bridgepoint’s offer to Cherry comes just two months after William Hill made a similar offer to Sweden-based Mr. Green & Co. The British company offered to their Swedish counterparts to expand their presence in new markets, reduce its dependence on UK markets and ensure that its online gaming and international revenue increases.
The consortium also said that they would not increase the offer. The offer is fully financed via an equity combination from Bridgepoint and other consortium partners. Ares Management Limited is also providing debt financing for the deal. The bids may be accepted from December 20 and will expire on January 23, 2019, if not extensions are provided.
Cherry will now face more competition as the Swedish gambling regulator Lotteriinspektionen has issued licensed to 33 companies interested in operating in the revised markets beginning January 1, 2019.