The Spanish multinational gambling company Codere regrets to the US regulators the “negative stance” of the Government of Spain against the bookmakers.
The founders of Codere deactivate their sicav in Spain and bet on Luxembourg
This is collected in the documentation that the Spanish group has referred to the SEC, the United States stock market regulator, equivalent to the Spanish National Securities Market Commission (CNMV), with a view to the process of merging its online subsidiary with a special purpose company (SPAC, for listing in the United States.
Since the formation of the current Executive of the PSOE and United We Can in January 2020, “the political conditions of this government have been, and could continue to be, of uncertainty (especially regarding its negative stance towards the gaming industry), given the differences on the agendas of the coalition parties and those whose support is necessary in Congress, “Codere indicates in the preliminary brochure sent to the SEC.
On the other hand, “political events related to the independence movement in Catalonia could continue to generate economic volatility and political uncertainty, reducing the demand for Codere Online products and negatively affecting its business”.
The group has announced the merger of its Luxembourg subsidiary Codere Online Luxembourg with the SPAC DD3, a vehicle listed on Nasdaq and based in the State of Delaware, to jump onto the US market. The extensive brochure sent to the SEC has a section on political risks that pays special attention to Spain, a country to which the company is “particularly exposed”: it is the main market for its online business (65%), well ahead of the turnover that Mexico (28%) and Colombia (3%) contribute to the subsidiary.
Codere also refers to the decree of the Ministry of Consumption to drastically limit the advertising of betting houses, prohibit these companies from sponsoring football clubs, offer so-called welcome bonuses to new players or issue advertisements except in the early morning hours. “Its impact on the activities of Codere Online in Spain is not yet clear, but it could be significant,” he says about this rule, which will be fully in force next month and which have been appealed by companies in the sector, clubs Spanish soccer grouped in LaLiga and the employers’ association of the traditional press, he points out.
That decree has already annulled in Spain the sponsorship agreement that the group had in place since 2016 to be the official Real Madrid bookmaker. This agreement is still in force in Mexico, South America and Central America, and is expected to be modified again, the company says. “The Codere Group has forged a strong relationship with Real Madrid in recent years and is currently exploring new avenues of collaboration in the future,” he adds in the brochure.
The document also recognizes the possibility, which the Spanish Government has put on the table, to limit the use of credit cards for online gambling, after the restrictions imposed in other countries such as the United Kingdom, which have prohibited them. If this measure is carried out, “it could have a material adverse effect” on the business, the results or the financial situation of Codere Online.
The subsidiary expects to start trading on the US index in the last quarter of the year. The transaction is subject to the SEC declaring the Registration Statement effective, the approval of DD3 shareholders and other customary closing conditions. The brochure does not rule out that the Spanish government may veto the sale of part of its online subsidiary, by virtue of the foreign investment protection mechanism that was put in place after the outbreak of the pandemic.
The company’s board of directors approved the merger operation with that SPAC on June 22. The merged company has an estimated proforma company value of about $ 350 million (€ 287 million). This represents 2.3 times the estimated income of Codere Online for the next year (125 million euros). Codere will maintain a participation percentage of between 54% and 73% in Codere Online, depending on the amortizations of the investors in the SPAC at the time the merger is completed.
70.5 million turnover
Codere’s online business had a turnover of around 70.5 million euros in 2020, with Spain as the only market that contributed profits (slightly less than 2.9 million). Online gambling was the main revenue stream for the subsidiary in 2020 (56.3%), followed by online casinos. The subsidiary, which has always been in losses, expects to make a profit in 2023. In 2020 it scored a red number of 16.2 million, similar to those of 2019.
The non-executive president of Codere, Norman Sorensen, already lamented shortly before the pandemic, without citing any specific country, the “radical political and social positions” against the bookmakers. The parent company has been in a very delicate financial situation for years, which has deteriorated in the last year as a result of the restrictions imposed by the health crisis. Currently its market capitalization is about 78 million euros, compared to the close to 1,000 million in which it closed 2017.
The group, with a significant physical presence in Spain, and which denied a few months ago in another document sent to the CNMV that there is “evidence” that the proximity of bookmakers affects minors, has since 2012 had a general license of online betting operator in Spain that expires in June 2022, although it can be extended for another ten years.
Until last year, Codere had as its advisor the former minister of the PP Pío Cabanillas, who was replaced in February by Gerardo Sánchez Revenga, former manager of Real Madrid, as a representative of Masampe, a company belonging to the Martínez Sampedro family, the founders of the company and those facing each other. to the funds that have controlled the multinational for years. The Martínez Sampedros have recently deactivated the Sicav they had in Spain while the one that Luis Javier Martínez Sampedro, former vice president of the multinational, has in Luxembourg remains active.