Entain to acquire Polish bookmaker STS for $946M, company shares slide after announcement

Online gaming giant Entain announced on Tuesday it will acquire Poland-based sports betting operator STS Holdings for £750 million ($946 million), in an effort to further expand its footprint in Europe. The company noted its offer is priced at 24.8 Polish zlotys ($5.97) for each STS share held, and that it is set to pay about £450 million ($569 million) in net cash for the deal.

This new deal follows Entain’s purchase of 365scores in April. STS, its new acquisition target, was founded in 1997 and is one of the largest bookmakers in Poland, in addition to having licenses to operate in the UK and Estonia.

The Ladbrokes owner said its Central and Eastern Europe venture, Entain CEE, and partner EMMA Capital, will fund the STS offer in proportion to their ownership in Entain CEE – about 75% and 25% respectively, says Reuters. The firm plans to raise about £600 million ($759.6 million) through an accelerated bookbuild and a separate retail offer in connection with the deal.

Entain CEE was established last year to drive growth in the betting and gaming markets across the Central and Eastern European region. In 2022, Entain CEE acquired Croatian operator SuperSport, a leading operator in its country with more than 50% local market share.

Mateusz Juroszek, STS Chief Executive, and his father, who own about 70% of the Polish bookmaker, will re-invest part of their proceeds into Entain CEE for a 10% stake in the venture. Juroszek will remain CEO of STS, also taking up a position on the Board of Directors of Entain CEE.

Mateusz Juroszek

“The management board, management structure and development plans for the Polish market remain unchanged as a result of the transaction,” said STS in a statement. “Instead, STS will be able to benefit from the knowledge, solutions, technology, and access to capital within a broad and international capital group.”

“In our view, the joining of STS, as proposed, with the Entain Group is a promising venture, giving the company the opportunity for another leap in growth. STS is the largest bookmaker in Poland and we are excited about working with Entain to unlock the synergies of STS and Entain CEE and the Entain Group as a whole to continue to deliver on STS’s exceptional performance,” said Juroszek.

On Wednesday, shares of Entain fell to the bottom of the London blue-chip index following the announcement of the STS purchase. The shares of the gaming group fell 10.5% to their lowest since March 29, in their biggest daily decline in four months as analysts picked through the deal valuation.

"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," said Matt Britzman, equity analyst at Hargreaves Lansdown, as per Reuters.

According to analysts, the deal valued STS at almost 11 times its expected cash profit (EBITDA). "Management expects the deal to be earnings accretive in the first full year, including impact of the equity raise; we estimate low single digit," Citi said in a note. "Some investors may question capital being allocated into such deals."