Paf has stressed excitement at building “on a great Latvian success story” after entering into an agreement to acquire the Latvian business of 888 for $28.25m.
The transaction comprises an initial consideration of €24m (£20.9m) to be paid in cash upon completion, and a further potential earn-out of up to €4.25m (£3.7m) that is due next year upon completion of the 2023 audited financials.
Christer Fahlstedt, CEO of Paf, said: “We are thrilled to get the opportunity to continue to build on a great Latvian success story. With a long-term perspective, we are convinced that the Latvian market is moving in the direction of increased player protection and thereby a great strategic fit for Paf.”
The divestment is expected to have zero impact on ongoing operations, with the gambling group noting that the sale is consistent with the company’s strategy to focus on core and growth markets.
Completion, 888 said, is contingent on the carve out of the Latvian subsidiary from the group’s supplier contracts and incorporation of the Latvian subsidiary into Paf’s contracts, certain change of control consents and the payment of a dividend. This is expected to be finalised within the coming weeks.
“We continually review our asset base to ensure that we are only holding assets that both contribute to our long-term strategy and will maximise value for our shareholders,” stated Lord Mendelsohn, Executive Chair of 888.
“As a business, our relatively limited exposure in the Baltic region means that the region is not one of our core or growth markets where we prioritise our investments.
“The Latvian business is a high-quality, locally regulated business, with an excellent team that has built a strong market position. I would like to express my sincere thanks to the team for their dedication during their time with the group and I am highly confident that under new ownership with Paf, the business will continue to flourish.”
In 2022, the business generated net revenue of £9.1m and EBITDA of £2.5m, and the value of the gross assets subject to the transaction, as set out in a December 31, 2022, balance sheet, was approximately £9.3m.
Janis Tregers, co-founder and head of Latvia board, commented: “We launched in 2012 as 11.lv, and in 10 years, have built a market-leading position in Latvia, with over 10 per cent market share.
“In 2018, we sold 75 per cent of the business to Mr Green at an enterprise value of €3.7m, and this transaction to sell the entire business for a valuation of up to €28m reflects the hard work of our team across the business resulting in significant value creation.
“Under the new ownership with Paf, I am confident that the business will continue to go from strength to strength, delivering great products and experiences for our customers.”