By Sangameswaran S
(Reuters) - Casino and gaming operator Rank Group has agreed to buy Stride Gaming in a deal valued at 115.3 million pounds, looking to extend its presence in Britain's thriving online gaming market.
Rank has been investing in online operations to offset a slowdown in traffic at its bingo halls and casinos, and to attract younger players who use mobile apps or websites such as its own meccabingo.com and grosvenorcasinos.com.
The bid, which Rank said would create the number two player in UK online bingo, is valued at 151 pence per share and would represent a 28% premium to Stride's closing price on Thursday.
Directors of Stride, whose brands include Regal Wins, Magical Vegas and Spin and Win, unanimously recommended shareholders vote in favour of the deal, which has won irrevocable acceptances from holders of 61% of its shares.
Rank said on Friday the acquisition is expected to deliver at least 13 million pounds of pretax recurring annual cost savings within the third year after the deal closes, adding it expects to cut duplicate jobs and rationalise the geographic spread of the combined operation.
Rank operates UK digital businesses out of offices in Gibraltar, Maidenhead and Sheffield, while Stride has offices in London, the Channel Islands, Mauritius, South Africa and Israel.
Rank, which is funding the cash deal through new debt and reached an agreement with NatWest Bank for a 128.1 million pound loan to finance the offer, expects the acquisition to boost its earnings per share in the first year following completion.
The combined business, which will migrate to Stride's technology under the management of its top executives, would have pro forma digital net gaming revenue of about 185 million pounds and would rank second in UK online bingo with an 18% market share.
Major rivals include Foxy Bingo, part of GVC Holdings.
ENGINE FOR GROWTH
"Stride will provide Rank with an engine for digital growth," Rank said. Its digital revenue already contributes nearly 19% of group revenue, according to half-year results announced in January.
Stride, which says it is the third-largest online bingo operator in the UK with 11% of the market, has been reviewing options to boost shareholder value and said in February it was looking at options including the sale of the entire company.
Stride also said regulatory changes across the UK online gaming market had hurt its half-year results, pulling gaming revenue down 13% to 30 million pounds for the six months ended Feb. 28.
Profit before tax fell to 2.6 million pounds from 3.9 million a year ago.
Investec Bank is sole financial adviser, nominated adviser and broker to Stride. Evercore Partners International is financial adviser to Rank and its corporate brokers are Peel Hunt and Goodbody.
(This story corrects to add dropped word in headline)
ADVERTISEMENT(Reporting by Sangameswaran S in Bengaluru; Editing by Patrick Graham and David Holmes)
