Evolution’s Board of Directors has urged shareholders to reject Candle Lake’s offer

Evolution’s Board of Directors has recommended that shareholders reject the mandatory takeover bid from Kenneth Dart’s investment firm, Candle Lake. In the Board’s view, the price of SEK695, approximately $72.89, per share does not reflect Evolution’s fair market value. The deal could, in theory, value the company at approximately SEK131.7 billion.

The recommendation was announced on Monday and followed a mandatory public offer made by Candle Lake on 13 August to acquire all remaining shares in Evolution.

Why the offer became mandatory

In July, Candle Lake increased its stake in Evolution to over 30% by purchasing a further 2,050,000 shares. Under Swedish law, any investor holding at least 30% of a company’s shares is obliged to make an offer to acquire the remainder of the business.

Arguments put forward by the Board of Directors

Following the announcement of the offer, Evolution’s Board of Directors issued a statement indicating that the price did not reflect the company’s fair market value. Furthermore, Evolution believes that Candle Lake made the offer solely to fulfil a formal legal obligation, rather than because it genuinely intends to acquire the entire company or make significant changes to the business.

The Board of Directors noted that Candle Lake itself had stated that it had no plans to make significant changes to Evolution’s future operations or overall strategy following the transaction, and the Board sees no reason to doubt this statement.

Will Evolution remain a publicly listed company?

Candle Lake had previously stated that, should it acquire a stake exceeding 90%, it would consider delisting Evolution from the Nasdaq Stockholm exchange and taking the company private. Judging by the board of directors’ stance, these plans may now face an obstacle.

A challenging period for Evolution

It has been a turbulent time for the company recently. Evolution’s licence was previously on the verge of being suspended by the UK Gambling Commission after the company’s games were found to be available on unlicensed websites within the UK’s jurisdiction. Instead of having its licence suspended, Evolution paid a settlement of £4.75 million for inadequate controls in the areas of anti-money laundering and customer due diligence.

The deal to acquire Galaxy Gaming also fell through; the deadline for closing the $85 million transaction expired in July, after which Evolution terminated the merger agreement.

Since the Stockholm exchange opened on August 24, Evolution’s shares have risen by 0.51% to SEK824.20.