Codere Online Luxembourg, S.A. (“Holdco”), Servicios de Juego Online, S.A.U. (“SEJO”) and their consolidated subsidiaries (collectively, “Codere Online” or “the Company”) and Codere Newco, S.A.U. have entered into a definitive business combination agreement with DD3, a publicly-traded special purpose acquisition company, that will result in Codere Online becoming a public company.
Codere Online will continue to be led by the Company’s Managing Director Moshe Edree and its highly experienced management team. Martin Werner, Founding Partner of DD3 Capital Partners, is expected to join the Codere Online Board of Directors.
Codere Online Investment Highlights
- Strong market opportunity supported by favorable demographic trends in Latin America – Very low existing market penetration with increasing adoption of smartphones, e-commerce and internet connectivity position the region for tremendous near, medium and long term growth (estimated at approximately 10x from 2020 to 2027 based on management projections and industry research).
- Omnichannel Strategy – Significant competitive advantage through Codere Online’s indirect parent company Codere Group, which has a leading retail footprint encompassing approximately 10,800 venues throughout Latin America, Spain and Italy (approximately 6,600 operating as of December 31, 2020 as a result of COVID-19 temporary closings) as well as a registered retail database of over 3 million registered players.
- Growth Opportunities in Core Markets and Expansion into New Countries – Codere Online, with a strong presence in Spain, Mexico, Colombia and Panama and its plan to start operating in the City of Buenos Aires (Argentina) in late 2021, is a leading online gaming operator in Latin America, a region expected to represent the next wave of strategic focus and growth for the global gaming industry.
- Market Expertise – Codere Group has a long history of successful Latin American operations dating back to 1984. Codere Online’s management has decades of experience establishing online gaming operations.
- Successful Operating Model – Codere Online and its management team have consistently demonstrated the ability to run successful online gaming operations and seek to apply this proven strategy and business model throughout the Latin American markets to drive profitability and positive operating cash flow.
- Proven and Flexible Technology Platform – Codere Group’s technology platform and Codere Online’s product can be scaled to support growth in core markets and expansion into new markets.
- Strong Brand – High visibility from long-running sponsorships of soccer teams and athletes.
“We are thrilled to partner with DD3. This deal brings together the renowned Codere brand and our deep expertise in growing online gaming businesses with a world-class sponsor like DD3 that has a proven track record of building businesses through a team of seasoned investors,” Moshe Edree, Managing Director of Codere Online, said. “By going public and with the new capitalization, we will be in a superb position to leverage our online business in our core countries of Spain, Italy, Mexico, Colombia and Panama, as well as the City of Buenos Aires, where we expect to start operating in late 2021, to fuel our further expansion in other high-growth Latin American markets.”
Martin Werner, Founding Partner of DD3 Capital Partners said, “We are excited to partner with Moshe and his team to bring Codere Online to the public markets. The omni-channel presence of Codere paired with the expansive addressable market and limited competition from global gaming operators gives Codere Online a unique advantage in their expansion across Latin America.”
“We are proud of this deal, which will provide our online team with the financial resources needed to grow Codere Online and take it to a new, higher level. It is a good signal of the value we have been able to create in the last three years, and the solid team and business platform achieved through Moshe´s leadership,” said Vicente Di Loreto, CEO of Codere Group.
Transaction Overview
The business combination values the combined company at an estimated pro forma enterprise value of approximately $350 million, or 2.3x Codere Online’s estimated 2022 revenue of approximately $150 million, and an implied equity market capitalization of approximately $500 million. Codere Online expects to have up to an approximately $145 million cash position to be used to fund marketing expenditures, technology platform improvements and expansion into new high-growth Latin American markets, assuming no redemptions by DD3’s shareholders.
Baron Funds, MG Capital, LarrainVial and DD3 Capital Partners have committed to a private investment of more than $67 million that will close concurrently with the business combination, and Baron Funds has committed to roll-over approximately $10 million of DD3 public shares. DD3 has $125 million of cash in its trust account, exclusive of any accrued interest. Codere Group has agreed to roll-over approximately 90% of its ownership and will maintain a majority ownership interest in Codere Online following consummation of the business combination.
The respective managing bodies of Codere Online and DD3, in addition to the Board of Directors of Codere S.A., have approved the proposed business combination. Completion of the proposed business combination is expected in the fourth quarter of 2021. The proposed business combination will be effected pursuant to the terms and conditions of a business combination agreement entered into by Codere Online, DD3, and the other parties thereto, which contains certain closing conditions, including, without limitation, the registration statement being declared effective by the Securities and Exchange Commission (“SEC”), approval by certain Codere Group noteholders, DD3 holding a minimum of $77 million in cash at closing, and approval by the shareholders of DD3. Pursuant to the business combination, Holdco will acquire both SEJO and DD3, and become a publicly-listed company in the United States.
Additional information about the proposed business combination, including a copy of the business combination agreement and investor presentation, will be provided in a Current Report on Form 8-K to be filed by DD3 with the SEC and will be available at www.sec.gov.
Advisors
Stifel is serving as financial and capital markets advisor to Codere Online. Davis Polk & Wardwell is acting as U.S. legal advisor to Codere Online. Clifford Chance is acting as legal advisor to Codere Online in Luxembourg. Deloitte is serving as accounting advisor to Codere Online.
EarlyBirdCapital is acting as financial and capital markets advisor as well as placement agent to DD3. Greenberg Traurig and Pérez-Llorca are acting as legal advisor to DD3. Stibbe is acting as legal advisor to DD3 in Luxembourg.
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