Entain raises £600m in placing to help fund Polish betting firm acquisition

Entain tumbled on Wednesday after it raised around £600m in a discounted placing and retail offer, part of which will be used to help fund the acquisition of Polish sports betting operator STS Holdings, and the remainder to fund near-term acquisitions.

The company, which owns Ladbrokes, announced after the close on Tuesday that it had agreed to buy STS for around £750m.

Entain placed a total of just under 48.3m shares at a price of 1,230p, which is a 6.9% discount to the closing share price on Tuesday.

Chief executive officer Jette Nygaard-Anderson said: "We are delighted to be acquiring the leading sports-betting operator in Poland, which is a hugely exciting and fast-growing market.

"STS is an exceptional business with a great brand, a compelling omnichannel offering, and an outstanding CEO and management team. The transaction is perfectly aligned with our Entain CEE strategy and our wider M&A strategy of acquiring high quality businesses with leading positions in attractive, growing and regulated markets."

He said expansion across Central and Eastern Europe remains a core component of Entain’s growth plans, and that STS will be an integral part of its platform in that region.

At 0840 BST, the shares were down 10.3% at 1,185p.

Matt Britzman, equity analyst at Hargreaves Lansdown, said: "There’s some maths to the price drop, new shares will be issued that represent 8.3% of the ordinary share capital prior to this announcement - diluting the holdings of any investor not able to take part in the raise. As I write, shares are now trading below the price paid by those involved in the capital raise, so any investor looking to get their piece of the pie back has a more attractive entry point.

"Strategically the deal makes sense, it continues the expansion into fast-growing regions and leverages many of Entain’s existing capabilities. The price is a sticky point, and potential cost synergies of £10m in the grand scheme of things are pretty thin. The £750m total cost values STS at 11 times its expected cash profit (EBITDA), that’ll drop to below 10 if the synergies are delivered - but still, that’s likely to be ahead of Entain’s current valuation. There’ll be plenty of pressure to make this work."