A consortium led by Bridgepoint, a UK-based private equity firm, has made a bid to take over Swedish gaming company Cherry AB, according to a release by Cherry earlier today.
The company is said to have received an offer for SEK 9.19bn, which is equivalent to around $1bn. Shareholders have been recommended to accept the offer by an independent committee that was set up to examine the bid. The offer equates to 87 Swedish crowns per share for stakeholders.
Shares up on Nasdaq
Cherry shares rose by 18.3% on the Nasdaq Stockholm to SEK 85.8, which is just slightly under their record high that was reached in November this year. An independent committee has been set up to advise shareholders because Cherry’s chairman, Morten Klein, is part of the bidding consortium.
The company, which was founded in 1963, operates in five principal business areas: online gaming, game development, online marketing, gaming technology and restaurant casinos.
The bid committee’s statement also mentioned that a number of Swedish institutions have announced that they will be removing themselves from the sector as a result of changes in investment mandates and new sustainability directives.
Opportunities and challenges
Bridgepoint partner Mika Herold said of the bid that they “believe that many of the opportunities and challenges facing Cherry and its subsidiaries are easier to approach in a private setting and with a more favorable capital structure”. The Bridgepoint consortium said the offer would not be increased.
The news of the offer comes at the end of a turbulent year for the company, during which two board members resigned following criminal investigations, but profits soared. Anna Bergius and Claes Ruthberg both handed in their resignation following an association with criminal activity carried out internally under the former CEO Anders Holmgren.
Cherry AB profits up in Q3
The Swedish gaming operator reported a profit of $20.5m for the third quarter of 2018, a significant increase on the same period in the previous year that was recorded at $4.6m.
When releasing the figures Cherry’s CEO Gunnar Lind said: “The positive trend in sales and gaming volumes continued throughout the third quarter… Cherry’s strategy of maintaining proximity to all parts of the gaming market and end customers is crucial to our continued growth.
“In many ways, Sweden is the most important market for us and for several European gaming companies, many of which have Swedish roots in the form of founders and entrepreneurs with abundant initiative.
“The Swedish market remains highly important for Cherry, while we are also seeing significant growth in other markets and our strategy continues to be to expand into markets where we see opportunities for good returns.”
The Swedish market evolution is one of the key reasons the company’s committee has advised shareholders to accept the offer on the table from Bridgepoint. The Swedish gambling regulator is continuing to issue new licenses ahead of the launch of the newly regulated online gambling market in January.
On Monday the Lotteriinspektionen, the Swedish gaming regulator, announced that four further companies have been granted licenses, which brings the total number of new licenses to 31 ahead of 1 January.