Codere Online to become first LatAm online gaming operator to go public

Codere Online is set to become the first publicly-listed online gaming operator in Latin America, through a merger with publicly traded special purpose acquisition company DD3.

The operator said in a press release Monday that Codere Online Luxembourg, Servicios de Juego Online and their consolidated subsidiaries, and Codere Newco have entered into a definitive business combination agreement with DD3 Acquisition Corp. II (Nasdaq: DDMX). that will result in Codere Online becoming a public company, at a pro forma enterprise value of approximately $350 million.

Codere Online will continue to be led by the company’s Managing Director Moshe Edree and its management team. Martin Werner, Founding Partner of DD3 Capital Partners, is expected to join the Codere Online Board of Directors.

The brand expects to have up to an approximately $145 million cash position to be used to fund marketing expenditures, technology platform improvements and expansion into new high-growth Latin American markets. Completion of the proposed business combination is expected in the fourth quarter of 2021.

In terms of investments opportunities following the merger, the company highlighted a "strong" market opportunity supported by favorable demographic trends in Latin America, as "very low existing market penetration" with increasing adoption of smartphones, e-commerce and internet connectivity position the region for "tremendous near, medium and long term growth."

Other investment highlights mentioned by the company include its omnichannel strategy. Codere Online’s indirect parent company Codere Group has a leading retail footprint encompassing approximately 10,800 venues throughout Latin America, Spain and Italy (approximately 6,600 operating as of December 31, 2020 as a result of COVID-19 temporary closings) as well as a registered retail database of over 3 million registered players.

Launched in 2014, Codere Online currently operates in its core markets of Spain, Italy, Mexico, Colombia and Panama and expects to start operating in the City of Buenos Aires (Argentina) in late 2021. 

“We are thrilled to partner with DD3. This deal brings together the renowned Codere brand and our deep expertise in growing online gaming businesses with a world-class sponsor like DD3 that has a proven track record of building businesses through a team of seasoned investors,” Edree stated. “By going public and with the new capitalization, we will be in a superb position to leverage our online business in our core countries of Spain, Italy, Mexico, Colombia and Panama, as well as the City of Buenos Aires, where we expect to start operating in late 2021, to fuel our further expansion in other high-growth Latin American markets.”

Werner commented: “We are excited to partner with Moshe and his team to bring Codere Online to the public markets. The omni-channel presence of Codere paired with the expansive addressable market and limited competition from global gaming operators gives Codere Online a unique advantage in their expansion across Latin America.”

“We are proud of this deal, which will provide our online team with the financial resources needed to grow Codere Online and take it to a new, higher level. It is a good signal of the value we have been able to create in the last three years, and the solid team and business platform achieved through Moshe´s leadership,” said Vicente Di Loreto, CEO of Codere Group.

This is DD3 Capital Partner’s second SPAC. DD3’s first SPAC successfully merged with Betterware de Mexico S.A. de C.V. in March 2020.

The business combination values the combined company at an estimated pro forma enterprise value of approximately $350 million, or 2.3x Codere Online’s estimated 2022 revenue of approximately $150 million, and an implied equity market capitalization of approximately $500 million. 

Baron Funds, MG Capital, LarrainVial and DD3 Capital Partners have committed to a private investment of more than $67 million that will close concurrently with the business combination, and Baron Funds has committed to roll-over approximately $10 million of DD3 public shares. DD3 has $125 million of cash in its trust account, exclusive of any accrued interest. Codere Group has agreed to roll-over approximately 90% of its ownership and will maintain a majority ownership interest in Codere Online following consummation of the business combination.

The respective managing bodies of Codere Online and DD3, in addition to the Board of Directors of Codere S.A., have approved the proposed business combination.