14th May 2014 09:33
LONDON (Alliance News) - Online gaming company GVC Holdings PLC Wednesday said that revenue growth has been strong in the second quarter, and announced that it is expanding into the Scandinavian gaming markets via a joint venture with Betit Securities Ltd.
GVC Chief Executive Kenny Alexander told Alliance News last month he was looking to make a move into Scandinavia and Asia, where GVC's key brand Sportingbet does not currently have a presence, as well as to use the upcoming football World Cup in Brazil, as its springboard for expanding in South America as early as the fourth quarter of this year.
GVC said Wednesday that it has now entered into a joint venture agreement with Betit Securities, via a new company known as Betit Holdings Ltd.
"GVC's commitment to expansion without undermining the current level of dividend is represented in this investment. The lucrative Scandinavian market has been on our radar for some time," Alexander said in a statement Wednesday.
Under the deal, GVC will pay an initial upfront commitment of EUR3.5 million of out of free cash flow for a 15% in the joint venture, and it also has a call option to acquire the balance of the outstanding shares, which can be exercised between July 1 and September 30, 2017. GVC said it will also be taking a seat on the board of Betit Holdings.
GVC said the minimum call option price is EUR70 million, and the actual price would be determined by the mix of revenues between regulated and non-regulated markets. It said the earnings multiples involved will lead to the transaction being accretive for shareholders.
It said that the 15% joint venture shareholding is dependent on the granting of approval by the Lotteries & Gaming Association of Malta, while the call option also will be subject to further clearance from Malta regulator and the AIM rules.
"Should the call option be exercised, GVC will have further diversified the group's geographic revenue mix," GVC said in a statement.
GVC said that if it decides not to exercise its call option, then Betit Securities may require it to acquire Betit's shares in joint venture anyway at a price determined by the mix of revenues between regulated and non-regulated markets, but without the floor price. If GVC fails to raise the financing to do so, then Betit can acquire GVC's 15% stake for a nominal price, GVC said.
Betit Securities is majority owned by venture capital business Optimizer Invest Ltd, which is owned and operated by iGaming veterans Henrik Persson, Andre Lavold and Mikael Harstad, who have helped launched Nordic Gaming Group, Betsafe.com and BestGames Holdings.
"By entering into this joint venture, we believe that GVC can diversify its revenue streams and significantly enhance the future dividend prospects and valuation of the group for a minimal initial outlay and is similar to what has been achieved through GVC's Betboo acquisition in Latin America," said Alexander.
In a separate statement, GVC said that net gaming revenues in the second quarter ended May 11, averaged at EUR601,000 per day, up 8.% on the previous quarter, and 11% higher than last year's EUR542,000 per day, supported by strong revenue growth from its mobile products. It said that on a constant currency basis, net gaming revenues in the second quarter, would have been 20% higher than the prior year. Sports wagers, margins and net gaming revenue in the quarter, were all up on last year.
"The board is encouraged by the strong trading so far this year and is confident that current market expectations for the full year will be met," the company said.
GVC shares were trading at 432.00 pence Wednesday morning, up 2.3%.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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