VGW’s Founder Laurence Escalante has reaffirmed the value of his takeover bid, despite acknowledging the regulatory challenges the sweepstakes sector is facing.
Escalante confirmed in a document to investors that his offer of AU$5.05 (£2.42)-a-share offer is “best and final”.
The takeover documents also revealed that the independent analysts Kroll Australia have assessed the offer as “fair and reasonable”, valuing the unlisted company at between $4.53 and $5.63 a share.
Regulatory headwinds
In the background of the takeover bid is an increasingly uncertain future for VGW, the operator of brands such as Chumba Casino, Luckyland Slots and Global Poker, and the wider sweepstakes industry.
Across the US, lawmakers and regulators have been seeking to ban the sector via legislation and cease and desist letters against operators. Earlier this year, Montana and Connecticut became the first two US states to bring into law bans on the vertical.
In June, VGW closed down its online sweepstakes offerings in New York, and it had previously shut down operations in Connecticut and Delaware following correspondence with regulatory authorities.
The document to investors also cites six states where VGW are live, which are currently considering legislation against sweeps, which, if passed, VGW acknowledges would have a “material advertise impact” on its financial performance.
“The regulatory and competitive environment in which our business operates is becoming increasingly uncertain and the risks have markedly increased over the past 24 months,” said Escalante.
“While I remain confident in VGW’s business and believe that BidCo and VGW will be strongly positioned to create and deliver value in the casino-themed social games market, we are also conscious of the risks in the regulatory and competitive environment in which we operate.”
He urged shareholders to accept his proposed scheme as it offers “guaranteed value” on their investment in VGW.
Under the terms of the scheme implementation deed presented by Escalanate’s family office, Lance East Office, VGW’s minority shareholders have the chance to accept the cash consideration or retain their investment via shares in Ocean BidCO Limited – an unlisted special purpose company created for the proposed takeover.
Investor unrest
Some of VGW’s 1000 minority shareholders have argued that the company is worth considerably more than what has been offered by Escalante – which values the company at approximately $3.2bn.
However, Mike Symons, who led the independent board committee that evaluated the offer, recommended that shareholders vote for the scheme as it is unlikely that a superior proposal will emerge that will allow shareholders to realise the value of their assets.
“The VGW Independent Directors believe the Total Transaction Value of $5.05 per VGW Share recognises the value of VGW’s business, after taking into account its medium and longer-term potential and the ongoing risks relating to VGW’s business and operating environment,” he added.
He also revealed that the board rejected an initial offer of between $3.50 and $4.00 per share in January 2024, before negotiating to achieve the improved offer that is now under consideration.
Escalante has previously landed in hot water, with sections of VGW’s 30% minority shareholding due to questions over the transparency of the company’s financial reporting.
Disruptions were largely fuelled by the decision of the firm to move to an annual reporting model, rather than a biannual reporting model, last year.
He further heightened tensions in May, as he launched into an angry rant on the social media site Telegram, telling investors to sell their shares if they didn’t trust VGW’s practices.
Over the past four years, VGW has returned over $1.3bn to its shareholders, with the majority heading to Escalante. He will receive a further $200m from the $286m of interim and special dividends set to be paid for the 2025 financial year.
Voting will now take place on 30 July to decide if shareholders accept the scheme.
