Codere Online to spin off and go public on Nasdaq with $350m SPAC deal

Codere Online, valued at approximately $350m (£251.8m/€294.2m), will continue to be led by its existing management team and Codere Group will maintain majority ownership.

In a statement, Codere Group said the listing will progress through a business combination agreement between Codere Online and special purpose acquisition company (SPAC) DD3 Acquisition Corp which has already been approved by the boards of both parties.

Codere Online said it will seek to take its business model in Spain and Mexico throughout Latin America, building existing markets such as Colombia and leading new opportunities in Brazil, Chile, Peru, Uruguay and Argentina. It will also analyse options to access the Hispanic online gambling niche in the US.

Completion of the proposed business combination – which Codere Group claims will create the first publicly listed online gaming operator in Latin America – is expected in the fourth quarter of 2021.

“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,” said Vicente Di Loreto, chief executive of Codere Group.

“It is a good signal of the value we have been able to create in the last three years boosting this business unit.”

The business combination values the combined company at an estimated enterprise value of approximately $350m, or 2.3 times Codere Online’s estimated 2022 revenue of approximately $150m.

Four institutional investors – DD3 Capital Partners Baron Funds, MG Capital and LarrainVial – have committed to a private investment of more than $67m that will close concurrently with the business combination and Baron Funds has committed to roll-over approximately $10m of shares in the SPAC, resulting in minimum transaction proceeds of $77m.

DD3 has $125m of cash in its trust account that, together with the private investment will be used to fund marketing expenditures, technology and platform improvements and expansion into new high-growth markets.

Moshe Edree, managing director of Codere Online, said: “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.

“By going public and with the new capitalisation, 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: “The omnichannel 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.”

Meanwhile, the wider Codere Group – which has faced financial difficulties – said it continues with the financial restructuring process started in April, with creditors last month approving a plan to take control of the business as the operator’s struggles continued in Q1. Shareholders also approved the deal.

Revenue was down 54.3% year-on-year to €127.2m (£109.9m/$155.1m) amid venue closures in almost all of its key markets.

The group said the Codere Online transaction does not imply any changes to the restructuring process announced to the market in April as a consequence of the severe liquidity problems that the group is going through as a result of the pandemic, and while the group will see some returns from the deal, they will not be more than $30m.

“The liquidity that this transaction generates will be invested mainly in Codere Online,” Codere Group said in a statement. “The rest of the group could only receive up to a maximum amount of $30m, subject to the fulfilment of certain conditions. Additionally, the valuation obtained for our online business is not an adequate reference for the rest of the company assets or its retail operation.”