New investigation
The UK’s Competition and Markets Authority (CMA) is starting an investigation on September 22 into Evolution Gaming’s planned acquisition of NetEnt. The authority has concerns that the deal could lead to lower levels of competition in the country’s online gambling sector.
CMA believes that the deal could lead to a “substantial lessening of competition”
In June, Evolution, a leading live dealer casino game supplier, announced a bid of SEK19.6bn ($2.2bn) for casino games developer NetEnt. While Evolution plans to become a world leader in the online gaming space through this merger, the CMA believes that the deal could lead to a “substantial lessening of competition.”
Any parties that want to comment on the acquisition can send their thoughts to the inquiry team via e-mail up to October 5. All of the feedback will be considered and an announcement on whether or not the investigation will proceed to a second stage will come on or before November 16. Both of the companies saw their share prices drop when the news was announced.
Details of the merger deal
Evolution is offering NetEnt SEK79.93 ($9.02) per share, which was a 43% premium on the market price of NetEnt when the bid was made. At the time, Evolution reiterated that there would be no higher offer forthcoming.
NetEnt’s board of directors unanimously recommended that shareholders support the merger, with many significant investors committing to it at the time.
The original plan was for the acquisition to be closed by November 2, but this will no longer be the case because of the CMA investigation.
Two strong companies
Both Evolution and NetEnt posted strong financial results for the second quarter of 2020. With land-based casinos mostly shut down across the world and most major sporting events postponed or canceled because of the COVID-19 pandemic, many gamblers shifted toward online casino games.
NetEnt’s total revenue for the first six months of 2020 increased by 30.2% year-on-year, while Evolution Gaming’s total revenue for Q2 rose by 50% year-on-year to €128.3m ($150.7m).
Both companies have been eying US expansion. Evolution has a live casino studio open in New Jersey, with two other facilities set to open shortly in Michigan and Pennsylvania. It also recently signed a partnership deal with BetMGM to power the brand’s live casino games in the US, as well as those of its sister brands, Party Casino and Borgata Online.
