31st May 2019 09:30
LONDON (Alliance News) - Bingo and gambling firm Rank Group PLC announced Friday it had made a GBP115 million cash offer to buy online gaming firm Stride Gaming PLC, shortly after the smaller Stride reported weaker interim results.
FTSE 250-listed Rank will pay 151 pence in cash per Stride share. This represents a 46% premium to the Stride share price prior to talks opening in early February and 29% higher than the closing price of Stride on Thursday, valuing the firm at GBP115.3 million.
Shares in Stride were 26% higher at 148.00p on Friday, Rank 0.6% higher at 146.60p.
"We are pleased to make this offer for Stride, which is a very complementary business to Rank," Rank Chief Executive Officer John O'Reilly said.
"We have long been impressed with the quality of the Stride management, technology and operations, which, we believe, offer significant opportunities to create value when combined with the Rank brands, customer-base and infrastructure," O'Reilly added. "The joining of our businesses will accelerate delivery of Rank's Transformation Plan and create one of the UK's leading online gaming businesses."
Earlier on Friday, Stride confirmed it was in advanced talks with Rank about a potential cash offer which had sent its shares soaring.
Stride also issued its interim results on Friday. For the six months ended February, Stride pretax profit narrowed 33% to GBP2.6 million from GBP3.9 million the year prior. This was after revenue fell 17% to GBP36.6 million from GBP43.9 million the year before.
Net gaming revenue - a key performance metric for gaming companies - fell 13% to GBP38.9 million from GBP44.9 million.
Stride decided against declaring an interim dividend in light of the talks with Rank.
"Despite Stride's strong market position, ownership of its own leading technology and excellent long term growth potential, the board recognises the scale of the mounting regulatory and fiscal pressures which the UK gaming sector is facing. It is also concerned that investor sentiment to Stride is likely to continue to be negatively impacted by these external pressures for some time," Stride Chair Nigel Payne explained after confirming the offer.
"Following the announcement of Stride's strategic review in February 2019, Stride had approaches from a number of parties, in addition to Rank," Payne added. "After extensive discussions, the board concluded that a combination with Rank has significant strategic logic and its offer of 151p per share represents fair value for Stride shareholders in the current environment. Accordingly the board of Stride is unanimously recommending Stride shareholders to vote in favour of the offer."