Entain Plc faces a shareholder clash in its £250 million pursuit to acquire leading Baltics online gambling group Enlabs AB.
Texas hedge fund Alta Fox Capital Management, the owner of 3.3% of Enlabs shareholding, has said that it will refuse to sell any shares to Entain at the recommended offer of SEK 40 (£3.50) per share.
Led by US investor Connor Haley, Alta Fox stated that Entain has ‘materially undervalued the company’ by proposing an offer to investors that provides a ‘negligible premium of 1.1% to the pre-offer trading price’.
Rejecting Entain’s bid, Alta Fox said that it has the support from ‘more than 10% of Enlabs’ investors that will choose to reject Entain’s recommended offer.
Further investor concerns have been highlighted by Alta Fox, such as the terms of the deal including “unusual circumstances that make us question why Enlabs’ Chairman Niklas Braathen accepted such an inadequate offer”.
Alta Fox is concerned that Entain’s guarantee that Braathen will be offered an executive position post-deal may have influenced the recommendation of the FTSE100 firm’s approach.
Braathen currently serves as Enlabs largest shareholder, maintaining 19.50% equity through his private investment firm Erlinghundra AB.
The executive acquired his significant shareholding in Enlabs, as the founder of Baltic Gaming Group – a company acquired by RedBet Gaming in 2007 – forming Enlabs’ new business entity.
Alta Fox has responded to Entain stating that shareholders must be compensated for the firm’s ‘excellent growth prospects and as a standalone entity’.
The US hedge fund believes that fair compensation should be priced at 55 SEK per Enlabs share – valuing the company at circa £337 million.
In making its bid, Entain marked Enlabs as a high-value target securing dominant market positions in the Baltic markets of Latvia, Estonia and Lithuania, with the company projected to generate net gaming revenues of €90 million and EBITDA €23.5 million.