By Joice Alves
LONDON (Reuters) -Shares of Ladbrokes owner Entain (LON:ENT) fell to the bottom of the London blue-chip index on Wednesday after the company announced it was buying Poland-based sports betting operator STS Holdings.
Entain shares fell 10.5% to their lowest since March 29, in their biggest daily decline in four months as analysts picked through the deal valuation.
After the European market close on Tuesday, the sports-betting and gaming company said it will pay 24.8 Polish zlotys ($5.97) for each STS shares in a 750 million pounds ($946 million) deal, which will expand its reach in Europe.
"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 (LON:HRGV).
Entain, which owns Coral betting shops as well as the bwin and partypoker online brands, also announced on Wednesday it had raised around 600 million in equity issuance to help pay for the acquisition.
According to analysts, the deal valued STS at almost 11 times its expected cash profit (EBITDA).
Entain 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.
"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."
STS, founded in 1997, is the one of the largest bookmakers in Poland and has licences to operate in the UK and Estonia. Its shares surged to December 2021 high, last up 12.3%.