London, England - Mecca Bingo owner and Grosvenor Casino operator Rank Group has recently announced that it is in “advanced talks” for its acquisition of social gaming and online bingo operator, Stride Gaming.
Rank has made an all-cash offer for the said acquisition, to the tune of 151 pence per share, or a total of £114.5 million. This represents a 29% premium to Stride’s closing price on Thursday, May 30th, the last business day before they formally made the offer. It also represents a 48% premium on the six-month average price per share of Stride. And as a result of the announcement, Stride’s share price rose by 23% at the opening of the markets right after news of the agreement came out.
The deal is expected to improve Rank’s overall performance and reduce their costs as they migrate to the Stride technology platform as well as their in-house ecosystem. They also expect their management team to be enhanced by the addition of some senior staff from Stride. Additionally, Rank believes the deal will give their combined businesses greater financial flexibility.
Rank Group Chief Executive John O’Reilly believes that the joining of Rank’s management expertise with Stride’s technology platform will result in “one of the U.K.’s leading online gaming businesses.” He said the deal is poised to create a business with significant capabilities in the digital market, and they are expecting digital net gaming revenues of about £185 million.
“We are pleased to make this offer for Stride, which is a very complementary business for Rank,” 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.”
While Rank has not said outright that the acquisition is a done deal, Stride has admitted that they have accepted Rank’s offer. Stride Chairman Nigel Payne said their decision to accept results from a concern that investor sentiment will continue to be negatively impacted by the “mounting regulatory and fiscal pressures” they’re getting in the U.K. gambling sector.
“Following the announcement of Stride’s strategic review in February 2019, Stride had approaches from a number of parties, in addition to Rank,” Payne said. “After extensive discussions, the board concluded that a combination with Rank has significant strategic logic, and its offer of 151 pence 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.”
Post-acquisition, the new digital firm is expected to be led by Eitan Boyd and Darren Sims, current Chief Executive and Chief Operating Officer of Stride, respectively. The pair will also be responsible for overseeing the migration of Rank’s online assets to the new platform.
This acquisition doesn’t come as much of a surprise, as the two companies have previous business links. It will be recalled that in May of 2018, Rank also acquired QSB Gaming Limited, of which Stride held a 24.2% stake. Stride has recently confirmed a dividend of 8 pence per share in relation to the earn-out agreement related to Rank’s QSB acquisition.