Allwyn Ent has backed out of its $9.3 billion public debut merger with Cohn Robbins Holdings Corp blank check company citing unfriendly market conditions. Is the pandemic-era SPAC winning streak for propelling gaming companies to stock markets ending?
Allwyn AG, an international lottery operator, has moved to call off its much-anticipated merger with Cohn Robbins Holdings Corp (CRHC), a special purpose acquisition company (SPAC). The deal announced in January would have seen Allwyn Ent. list its shares on the New York Stock Exchange (NYSE), and the company’s combined enterprise was valued at $9.3 billion.
Unfortunately, Investors such as Allwyn Ent are shying away from SPACs, also known as blank check companies, because of a decline in public market valuations, increasing interest rates, and strict regulations. An official statement released by Allwyn Ent on Saturday, September 24, said:
Quote“Allwyn, Europe’s largest lottery operator, received strong indications of support during recent meetings with investors, but the marketing period coincided with significant market volatility amid a backdrop of concerns about the prospects of inflation, interest rates, and recession.”
Allwyn Entertainment is Still Hoping to Go Public
Allwyn Ent., formerly known as Sazka Entertainment, runs lotteries in Cyprus, the Czech Republic, Greece, Italy, and Austria. The company is a subsidiary of KKCG, a private investment group founded by Czech billionaire Karel Komárek in 1995. KKCG officially became the sole owner of Sazka in 2012 before it grew to become a multinational lottery operator.
Although the SPAC marriage has failed, Allwyn is still looking forward to becoming a publicly traded company on the NYSE when market conditions eventually become favorable. Therefore, the company will continue to pursue profitable and sustainable growth and spread its wings to the United States and mainland Europe.
Additionally, according to Allwyn CEO Robert Chvátal, the company’s financial results showcase a solid cash-generative business. As a result, it will focus on its growth strategy and make investments once new opportunities arise.
It’s worth noting that back in March, the UK Gambling Commission announced Allwyn was their preferred applicant to take over National Lottery operations. While the tender approval was delayed because of Camelot’s legal challenge, Allwyn was finally awarded the contract. Thus, the famed gaming company will be the new operator of the UK’s National Lottery competition starting in 2024, ending Camelot Group’s 28-year tenure.
If Allwyn goes public, its shares would be attractive to investors since it has won the UK National Lottery contract. Moreover, as a gaming company only focused on lotteries Allwyn’s shares might not be subjected to conglomerate discounts other lottery businesses face.
What Next for the Cohn Robbins Holdings Corp SPAC?
The CRHC SPAC was founded in 2020 by Gary D. Cohn, an economic policy adviser to the former President of the US, Trump, and Clifton S. Robbins. In September of the same year, the company raised $828 million through investors.
Investors had even offered commitments of about $700 million to support the business combination agreement with Allwyn. However, the deal has failed to materialize due to volatile market conditions.
A statement released by the co-founders of CRHC read in part:
Quote“Our partnership with Allwyn was announced in January, and since then, we have witnessed a pronounced negative turn in market psychology, and just last week, the market suffered its worst day since June 2020, with the sharply negative trend continuing this week. Karel Komárek and his teams at KKCG and Allwyn have much to be proud of in the lottery-led entertainment company they are building. Nevertheless, the persistently volatile and negative market conditions have led to our mutual decision with Allwyn not to proceed in completing the transaction. We wish them every success going forward.”
Usually, blank check companies receive a 2-year grace period to find a merger partner before they are forced to liquidate. At the beginning of the month, Cohn Robbins Holdings’ investors passed a vote to extend the company’s business combination deadline to December 11.
From the company’s press release, the CRHC Board of Directors will meet soon to discuss the company’s next course of action, including seeking alternative business combination agreements.
The Covid-Era SPAC Hot Streak Might Be Coming to an End
From 2020 to 2021, SPACs were the most sought-after arrangements by players in the gaming industry as a vehicle to go public. Unfortunately, it may no longer be the case as a few companies that went public through blank check deals are currently struggling. The shares of some of these companies have even plummeted to 1$ or below, discouraging investors in the process.
The Allwyn-CRHC blow came the same day as a blank check firm backed by American private equity firm, TPG Inc, decided to close its operations due to market volatility. Additionally, Playtech halted a merger in August with an American blank check company Tekkorp Digital Acquisition Corp, citing a deterioration of the market conditions.
Nonetheless, companies such as PlayUp announced last week that it is planning to enter a business combination deal with a SPAC. The merger will help PlayUp go live on the NASDAQ exchange as it seeks to expand to the United States.
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