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First thoughts: OPAP | Sazka group submits voluntary public offer for OPAP shares

According to a formal filing submitted yesterday, Sazka Group – which controls directly or indirectly 33% of the voting rights in OPAP – has submitted a voluntary public offer for the remaining shares (213.73m shares or 67% of the share capital of OPAP). The price offered stands at €9.12 per share, namely c9% discount to last Friday’s close. The offer price effectively corresponds to the 6-month VWAP (€9.11) and effectively values the shares at 8.4x 2019 EV/EBITDA, small discount vs. UK bookmakers’ current valuation but >40% discount vs. Paddy Power (Flutter Entertainment).

The offering price might be met with some degree of disappointment by investors as it is lower than the current share price (and c22% below our price target for the stock). Our view is that the main motive of the controlling shareholder might not be the high participation of other shareholders in the particular tender but just a small increase of its shareholding through the voluntary offer, so that it can surpass the trigger for the mandatory takeover bid (33.3%). Assuming this were to materialize, Sazka group would have more flexibility to increase its stake at a later stage without being obliged to proceed to a mandatory takeover bid. Besides the underlying motive, we reckon that the offer is indicative of Emma Delta’s long-term support for OPAP in terms of shareholder ownership while also setting a floor for the valuation. On the other hand we caution that in the short-term, the relatively low level of the offer price may put the shares under pressure.