Italy's Lottomatica to merge with Spain’s Cirsa in all-share deal

Italian gaming firm Lottomatica (LTMC) is set to acquire Spain's Cirsa Enterprises in a €3.7 billion all-share merger, creating one of the world's largest public gaming and sports-betting groups. Each Cirsa shareholder will receive 0.668 newly issued Lottomatica shares for every Cirsa share held. Lottomatica will control roughly 67.5% of the combined company, while Cirsa shareholders will own about 32.5%.

Following the merger, Blackstone, which controls Cirsa through LHMC Midco, will become the largest individual shareholder, holding around 24% of the enlarged company. As of September 1, 2023, at Lottomatica's closing price of €24.77, the exchange ratio suggests each Cirsa share is valued at approximately €16.55, representing a 21% premium to Cirsa's previous close and valuing the Spanish gaming company at about €2.8 billion.

The combined entity is expected to generate about €2 billion in pro forma adjusted EBITDA for the fiscal year ending June 30, 2027, with annual revenue expected to exceed €4.4 billion. The merger is projected to generate around €115 million in annual pretax cash synergies.

In a pre-merger move, Cirsa will distribute an extraordinary dividend of €262 million, or €1.56 per share, to its shareholders. Post-merger, Lottomatica plans to offer shareholders a further €744 million in capital returns via a partial voluntary tender offer, an extraordinary dividend, or a combination of both.

Strategically, the deal enhances Lottomatica's international scale while integrating Cirsa's established operations across Spain and other markets. Lottomatica already holds a strong presence in Italy and a growing online business, whereas Cirsa operates in gaming, casinos, slots, and online betting with recent acquisitions.

Cirsa reported €637 million in operating revenue and €202 million in operating profit in the second quarter of 2023, with operating profit increasing 8.3% year over year. Cirsa's online gaming and sports-betting revenue grew 14.9% in the first half, and first-half operating profit rose 8.4%. Lottomatica also reported strong growth, with €856 million in adjusted EBITDA in 2023, up 21%, and adjusted net profit of €369 million, up 45%.

The merger occurs shortly after Cirsa's public-market debut, allowing Blackstone to retain significant exposure through a large stake in the combined listed company.