Gaming technology group Evolution AB has announced a major share buyback programme valued at €2 billion ($2.3 billion).
The supplier, which made the announcement on Tuesday, also detailed a €300 million revolving credit facility. This will be designed to sustain liquidity during the extensive repurchasing exercise.
The buyback scheme follows shareholder approval granted at Evolution’s Annual General Meeting on 24 April. The purpose was to “optimise the capital structure of the company by reducing the share capital, thereby creating added shareholder value”, it said.
Evolution has been re-evaluating its focus in recent months – the company recently reported in its Q1 earnings that growth was being driven largely by North and Latin America, rather than Europe.
According to the company 48% of its Q1 revenue was generated from regulated jurisdictions.
The details
The company’s board has since authorised repurchases of shares worth up to €2 billion on Nasdaq Stockholm or other regulated markets.
Repurchases will be executed by an independent investment firm or credit institution appointed by Evolution. It will determine the timing of transactions without direct input from the company.
The programme is permitted to run until the entire ceiling has been utilised or until further notice. This could potentially span multiple purchases and extend up to the 2027 annual general meeting.
Any shares repurchased will be paid for in cash and transacted within price limits reflective of prevailing market conditions.
Under Swedish regulations, Evolution is capped at holding no more than 10% of its issued shares at any given time. With 199,226,613 shares currently outstanding and zero treasury shares held, the company can repurchase up to 19,922,661 shares under this restriction.
Evolution’s board has indicated the possibility of an extraordinary general meeting to potentially cancel repurchased shares if holdings approach the 10% threshold. This measure would allow for authorisation of a fresh buyback programme to continue share repurchases up to the authorised limit.
Looming legality
The company’s latest capital management plans arrive during a period of increased regulatory and legal scrutiny for the company. Evolution remains engaged in ongoing legal proceedings in New Jersey linked to allegations that its games were made available through unauthorised operators in restricted markets, claims the company has repeatedly denied. Earlier this year, the company sought to add Playtech to the defamation lawsuit connected to the long-running dispute.
The move stems from allegations that Playtech orchestrated and funded a false and commercially motivated smear campaign intended to damage Evolution’s reputation and obstruct its entry into the North American online gaming market.
Playtech allegedly engaged Black Cube to conduct an investigation into Evolution’s activities in prohibited and unlicensed markets. But the supplier assured investors that the investigation had been undertaken lawfully.
The Superior Court of New Jersey will decide whether to allow the amended complaint to proceed.
Evolution is also being investigated by the UK Gambling Commission for its games being linked to unlicensed sites in the market. The outcome of the multi-year review is still pending.
Backup financing facility
In parallel with the buyback announcement, Evolution has established a €300 million senior unsecured revolving credit facility (RCF). The facility will be with JP Morgan SE and Citibank Europe plc. The facility carries a three-year bullet repayment schedule, with two optional one-year extensions. It will serve as standby financing to preserve the company’s financial flexibility.
The move to secure backup liquidity coincides with Evolution’s description of the buyback as a “material adjustment” to its capital structure, indicating prudence amid significant capital deployment.
Kathryn Evans
Kathryn covers bitesize breaking news with a primary focus on EMEA and US legislation. A proud North Walian, fluent Welsh speaker and lifelong Wrexham FC fan – long before Hollywood came calling.
Original article: https://igamingbusiness.com/finance/evolution-launches-e2-billion-share-buyback-programme/
