Evolution has rejected the mandatory takeover offer from Candle Lake, telling shareholders the SEK131.7bn ($13.8bn) proposal does not reflect the fair market value of the live casino supplier.
Candle Lake, a Cayman Islands investment vehicle wholly owned by billionaire Kenneth Dart, was legally obliged to make the offer after its stake in Evolution crossed the 30% threshold that triggers a mandatory bid under Swedish takeover law. The firm now holds approximately 31.56% of Evolution’s shares (59,798,619 shares), with total financial exposure of roughly 32.04% once cash-settled total return swaps are included. Evolution, a Nasdaq Stockholm-listed supplier of live dealer casino games to online operators worldwide, is one of the largest gaming technology companies on the exchange by market value.
In a statement on Monday morning, Evolution’s board said it had weighed the current price of its shares, the company’s strategic and financial position, and its expected future development, including the opportunities and risks involved, before turning the offer down.
Below market, says the board
Candle Lake’s SEK695-per-share cash offer values Evolution at SEK131.7bn ($13.8bn), a 5.7% discount to the SEK737.2 close on 12 August, the trading day before the bid was announced. Shares not already owned by Candle Lake are valued at approximately SEK90.1bn. Evolution’s stock traded up to SEK747.4 in the days after the offer became public, already above the SEK695 bid price.
Based on its assessment, and in light of the discount in offer compared to the company’s current share price, the board of directors considers that the offer does not reflect the fair market value of Evolution, the company said.
The board also pointed to Candle Lake’s own framing of the bid as a reason to reject it.
The board of directors also notes that Candle Lake has expressed that the offer is not motivated by any intention to acquire all outstanding shares in Evolution and that the offer is made pursuant to Candle Lake’s mandatory offer obligation, Evolution said.
How the mandatory offer was triggered
Under Chapter 3, Section 1 of the Swedish Act on Public Takeovers on the Stock Market, an investor that passes 30% ownership in a listed company must offer to buy the remaining shares from every other shareholder. Candle Lake crossed that line on 24 July after buying 2.05 million additional shares, and published its offer document on 14 August.
The firm has framed the bid as a legal requirement, not a push for control. It has described its Evolution position as a long-term investment and says it has no plans for material changes to the company’s operations, management or employment conditions.
Dart’s approach to Evolution is not an isolated move. He holds close to 29% of Flutter Entertainment and recently disclosed a 5.8% stake in DraftKings, giving him sizeable exposure across the industry’s largest operators without pursuing outright control of either one.
What happens next
The acceptance period for Candle Lake’s offer runs from 17 August to 15 September, with settlement due to begin on 23 September. Evolution’s board was required to issue a recommendation no later than two weeks before the acceptance period closes, and it has now done so with an outright rejection.
That rejection does not withdraw the offer. Evolution shareholders can still tender their shares individually regardless of the board’s view, and Candle Lake has said that if its ownership exceeds 90% it would seek to delist Evolution from Nasdaq Stockholm and take the company private. Candle Lake sits well short of that mark for now.
The board’s rejection puts the decision back on individual shareholders for the remainder of the acceptance window. Their response over the coming three weeks will show whether the market agrees that SEK695 undersells Evolution, or whether enough investors take the cash regardless of the board’s recommendation.
Source: Evolution AB
