Codere shares soared 24.5% in the early stages of the session on Tuesday after announcing that its gaming subsidiary on-line, Codere Online, will be listed on the Nasdaq after its board of directors has approved an operation to merge this business with DD3, a listed company with purpose for acquisition (SPAC, for its acronym in English) valued at approximately 350 million dollars (287 millions of euros). After announcing this operation, the titles of the gaming company soared 25% around 12 noon, until they were exchanged at a price of 0.78 euros.
According The group has reported this Tuesday to the National Securities Market Commission (CNMV), its subsidiary Codere Newco will contribute Codere Online to a company holding company Luxembourg company, named Luxco, which in turn will merge with DD3 and will be listed on the US Nasdaq. The merged company has an estimated proforma company value of approximately 350 million dollars (287 million euros), or what is the same: 2.3 times the estimated income of Codere Online for the next year (125 million euros).
Codere will maintain a stake of between 54% and 73% in Codere Online, depending on the repayments of the investors in the SPAC at the time the merger is completed.
Within the framework of this operation, four institutional investors (Baron Funds, MG Capital, LarrainVial and DD3 Capital Partners) have committed to make a private investment in the SPAC for the amount of 67 million dollars, which will be closed immediately before the operation . At the same time, Baron Funds has agreed to hold a position of approximately $ 10 million in SPAC shares, which will lead to a minimum operating income of $ 77 million.
Investors will have the option to write off their existing cash contributions to the SPAC. This account has 125 million dollars in a trust account, so the amount of the funds will be between 77 and 192 million dollars depending on amortizations and before expenses.
Codere may dispose of up to 30 million dollars of the total funds of the operation that exceed 125 million dollars. The rest of the income will be used by Codere Online to finance expenses of marketing, technological and platform improvements and for its expansion into new high-growth markets.
By keeping Codere in control of your business unit on-line, the operation will not generate any impact on the consolidated income statement of the company. “No impact on the net profit of the company is expected as a result of the operation,” says Codere. The group explained that the injection of liquidity resulting from the online operation will be recorded in the balance sheet as consideration for the reduction of its stake in Codere Online.
Likewise, the company has clarified that this operation “does not alter the need to implement” its restructuring, since its business “continues to be highly affected by the evolution of the pandemic” and its liquidity continues to be “limited”. “The potential receipt of an additional amount of liquidity of 30 million dollars in accordance with this will not change this fact,” he warns.
The group has also explained to the CNMV that this operation requires the consent of the holders of a majority of the approximately 353 million euros of guaranteed super senior bonds maturing in 2023 and of the senior guaranteed bonds for an amount of 500 million euros and $ 300 million due in 2023.
Likewise, the operation requires the consent of the bondholders that are part of the ‘Lock-Up’ agreement of April 22. In this sense, Codere has indicated that a majority group of the main bondholders under the ‘Lock-Up’ agreement and that they hold a majority of the Super Senior Bonds, has given their prior written consent.
Codere is also initiating the public consent request processes in relation to the Super Senior Bonds and the Senior Bonds to obtain the required consents of all bondholders to subscribe the operation. The group has highlighted that this operation is beneficial for all its stakeholders, including its shareholders and bondholders.