CMA is thinking twice about Evolution Gaming's NetEnt acquisition

However, there may be an unexpected hurdle in Evolution Gaming’s bid for NetEnt. It was announced recently that the UK’s Competition and Markets Authority (CMA), is set to investigate the proposed acquisition. It is said that the CMA is concerned that the merger between the two giants could reduce competition in the UK’s internet gaming market.

Things have changed over the last 20 years, when there were only 4 main game providers and now there are over 200. It is the responsibility of the CMA and other regulatory bodies to make sure that a balance is maintained in the competitive industry and that competition is not challenged by mergers & acquisitions.

On September 22nd, the CMA opened its inquiry into the acquisition bid and gave interested parties time to comment on the proposed deal. After studying the feedback, the authority will move onto the next phase of its investigation by November 16th.

Acceptance Period Extended as Result of CMA Investigation

As a result of the pending investigation, Evolution extended the period for NetEnt shareholders to accept its acquisition offer until November 20th. This is in order to allow the investigation process to continue unhampered. The acceptance period for the offer was initially due to expire on October 30th, and the deal was to be finalized by November 2nd.

If all goes well and the CMA approves the deal, the settlement of the contract is expected to begin on December 1st.

The deal already has the blessing of Malta’s Competition and Consumer Affairs Authority.

The Board of Evolution Gaming issued a statement saying: “As a result of the timing for the CMA process, the board of directors of Evolution has resolved to extend the acceptance period for the offer up to and including 20 November 2020,” the Evolution board said. Other than the extension of the acceptance period, the terms and conditions of the offer remain unchanged.”

Evolution, NetEnt Shares Dip

After the CMA announced its decision to open an investigation into the deal, shares for Evolution dropped from SEK 595.40 to SEK 567.20, however they recovered and traded at SEK 50.20 by the end of the day.

NetEnt started its week with shares trading at SEK 76.50, but they also saw prices dipping to SEK 74.00

Analysts believe that the CMA will give their final blessing to the deal, and are not too concerned about the stock prices slipping.

When Evolution made the offer to purchase NetEnt, the group said that shareholders holding 20% of NetEnt shares indicated that they’d be willing to accept the offer. In addition, NetEnt’s Board of Directors unanimously recommended that their shareholders back the bid.

Greater Exposure to US Market

The offer was welcomed by NetEnt’s chairman Mathias Hedlund, who said that the combination of NetEnt’s expertise in online slots, with Evolution’s iconic live casino brand would give the two greater exposure in expanding markets, especially in the United States.

According to FinsMes: “The combined product portfolio will include Live Casino and online slots games and generate revenue upsides through cross-selling and improved distribution via both companies’ customer bases, with closer customer partnerships and additional geographical spread of the companies’ products as result. The joint company will grow internationally, both organically and through additional acquisitions.”

About Evolution and NetEnt

NetEnt was launched in 1996. The digital entertainment company develops games and system solutions for gaming operators. It trades on Nasdaq Stockholm and employs over 1,000 people from all over the world, including Malta, Stockholm, Sofia, Gibraltar, Kiev, Krakow and New Jersey.

Evolution was launched a decade later and is led by Jens von Bar. The group develops, produces, markets and licenses Live Casino solutions to international gaming operators. Evolution has grown into a B2B provider and boasts 300 satisfied customers around the world. Evolution is a bigger company than NetEnt, employing over 8,000 people in studios across North America and Europe. Evolution, too, trades on Nasdaq Stockholm.

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