Codere Online May Be Buyout Target Amid Parent Company Takeover Rumors

• Spanish media reports suggest Codere Group is a takeover target
• That could stoke buyout interest in Codere Online
• Prospective buyers of Codere Group could look to simplify the corporate structure

Amid speculation that Codere Gaming (CG) is positioning itself for a sale, similar interest could make its way to Codere Online Luxembourg (NASDAQ: CDRO).

In a new report to clients, Stifel analyst Jeffrey Stantial said that while it’s possible that CG’s 66% stake in the online gaming entity could last through a takeover, would-be buyers may want to streamline the corporate structure and thus potentially part with that interest.

We argue sale of CG may lead to a takeout of CDRO as well given simplification of corporate structure and omnichannel strategy for a strategic acquirer, and potential online mix shift re-rate and/or hidden asset value arbitrage theses for a financial buyer,” observes the analyst.

Codere Online, founded in 2014, is a unit of Codere Group — the only listed Spanish company in the gaming industry. The online operator is the first internet gaming entity from Latin America to publicly trade in the US.

Codere Online May Be Appealing Takeover Target

With Spanish media reports indicating that CG hired investment banks Jefferies and Macquarie to potentially position itself for a sale, attention could eventually turn to a similar scenario for Codere Online. Following multiple restructurings, CG is owned by about 80 creditors that previously converted debt to equity.

“We believe this update incrementally improves line-of-sight to a potential takeout regardless,” adds Stantial.

Codere’s core markets, including Mexico, Spain, and other Latin American nations, make the online sportsbook operator a potentially compelling target for suitors because online betting is a rapidly growing industry in those markets. Additionally, Codere Online doesn’t operate in the US, meaning it avoids heavy promotional spending and the specter of prediction markets possibly chipping away at its customer base.

Codere Online Is Also a Logical Buyout Candidate

The Spanish sportsbook operator, which went public on Dec. 1, 2021 following a combination with blank-check firm DD3 Acquisition Corp. II, also makes for a logical takeover target due to factors including strategic for would-be buyers and the possibility Codere Online could fetch more in a sale than where the stock trades at today.

“For a financial buyer, we believe strategic rationale could partially be predicated on ommichannel advantages and multiple expansion from mix shift to online (a thesis underpinning several recent transactions) similarly encouraging consolidation of the publicly-traded stub,” concludes Stantial. “Otherwise, we could see a credible ‘hidden value’ arbitrage thesis for financial buyers potentially accelerating divestiture of CDRO to an online pure-play looking to expand into LatAm — a potential long-term exit we’ve heard theorized for several years.”