Madrid, June 21, 2021
Total Page:16
File Type:pdf, Size:1020Kb
Avda. de Bruselas, 26 28108 Alcobendas Madrid Telf: 91 354 28 00 Madrid, June 21, 2021 In accordance with article 226 of the consolidated text of the Spanish Stock Market Act approved by the Legislative Royal Decree 4/2015 of 23 October, Codere S.A. (the "Company" and together with its subsidiaries, "Codere"), hereby informs of the following: INSIDE INFORMATION Online Transaction The Company hereby announces that certain of its subsidiaries, including Codere Newco, S.A.U. and Servicios de Juego Online, S.A.U., have entered into a business combination agreement (the "BCA") relating to a transaction (the "Online Transaction") involving the disposal of a minority interest in Codere's online business ("Codere Online"). A copy of the BCA is attached to this announcement, along with an investor presentation. The Online Transaction and the BCA have been approved by the Company's board of directors. As part of the Online Transaction: Codere Newco, S.A.U. ("Codere Newco") will contribute Codere Online to a newly incorporated Luxembourg- based holding company, Codere Online Luxembourg, S.A. (“Luxco”), which will in turn via a merger acquire DD3 Acquisition Corp. II, a special purpose acquisition company ("SPAC"). Codere Newco and certain of its subsidiaries will enter into certain ancillary agreements and any other agreements necessary to consummate the Online Transaction. In connection with the merger, Luxco will be listed on the NASDAQ, a stock exchange in the United States of America. Codere will maintain a between 54%-73% ownership stake in Codere Online, depending on SPAC Investor redemptions, at the time of the consummation of the merger. Existing Codere Online management will continue operating the business following completion of the Online Transaction. Four institutional investors (Baron Funds, MG Capital, LarrainVial and DD3 Capital Partners) have committed to a private investment of $67 million that will close immediately prior to the Online Transaction, and Baron Funds has committed to roll-over approximately $10 million of shares in the SPAC, resulting in minimum transaction proceeds of $77 million. SPAC investors will have the option to redeem their existing cash contributions to the SPAC. The SPAC has $125 million of cash in its trust account – implying total proceeds ranging from $77m to $192 million depending on redemptions, prior to any expenses. The Online Transaction values the combined company at an estimated pro forma enterprise value of approximately $350 million (€287m) or 2.3x Codere Online’s estimated 2022 revenue of approximately $150 million (€125 million). Codere will be permitted to withdraw up to $30 million of any proceeds of the Online Transaction in excess of $125 million. The remaining proceeds, net of transaction expenses, will primarily be used by Codere Online to fund marketing expenditures, technology and platform improvements, and expansion into new high-growth markets. The Online Transaction is expected to complete in Q4 2021. Noteholder Support The Online Transaction requires the consent of the holders of a majority of Codere's approximately €353 million super senior secured notes due 2023 (the "Super Senior Notes"); and its €500m and $300m senior secured notes due 2023 (the "Senior Notes" and together with the Super Senior Notes, the "Notes"; and the holders thereof, the "Noteholders"). In addition, the Online Transaction requires the consent of the 'Majority Consenting Noteholders' under and as defined 1 Avda. de Bruselas, 26 28108 Alcobendas Madrid Telf: 91 354 28 00 in the lock-up agreement (the "Lock-Up Agreement") dated 22 April 2021 and made between, among others, the Company and certain of the Noteholders. This consent is required because, among other considerations, certain transactions are restricted by the terms of the Lock-Up Agreement and the Super Senior Notes Indenture and as part of the Online Transaction Codere Online will consist entirely of "Unrestricted Subsidiaries" i.e. subsidiaries which are not subject to the covenants applicable to the Super Senior Notes and the Senior Notes. The ad hoc committee of the Company’s largest Noteholders (the "Ad Hoc Committee"), which represents the Majority Consenting Noteholders under the Lock-Up Agreement and which holds a majority of the Super Senior Notes, has provided its prior written consent to the entry into the BCA under the Super Senior Indenture and the Lock-Up Agreement. Codere is also launching public consent solicitation processes (the "Consent Solicitations") for the Super Senior Notes and the Senior Notes to obtain the requisite consents of all Noteholders to entering into the Online Transaction. Forms of the consent solicitation statements, which will shortly be circulated to Noteholders via the clearing systems, are attached to this announcement. The Ad Hoc Committee, who hold sufficient majorities in each series of Notes to provide the requisite consents, have committed to vote in favour of the Consent Solicitations. No Effect on Restructuring As referred to in its inside information announcement dated 22 April 2021 (register number 849), the Lock-Up Agreement commits the parties to implement a restructuring transaction (the "Restructuring") on the terms and subject to the conditions set out in the Lock-Up Agreement. The Online Transaction, being an equity transaction in which Codere retains control of the business unit, will not generate any impact in the consolidated P&L of the Company. On a going concern basis, the liquidity injection would be registered in the balance sheet against the corresponding minority interest. As a result of the Lock-Up Agreement, the Company will report on a 'Discontinued Operations' basis starting in Q2 2021 and thereafter until completion of the Restructuring transaction. Under such principles, the value of the discontinued assets and liabilities will follow the same recognition mechanics and no impact on the net profit of the Company is expected from the Online Transaction. The Company believes the Online Transaction is beneficial to all of its stakeholders, including its shareholders and Noteholders. However, the Online Transaction does not change the need to implement the Restructuring. Codere's business and operations remain severely impacted by the ongoing Covid-19 pandemic, and its liquidity continues to be strained. The potential to receive up to $30 million of additional liquidity pursuant to the Online Transaction will not change that position. The Company would also caution that it does not consider the estimated valuation established for Codere Online by virtue of the Online Transaction to be reflective of valuations that might be obtained for other parts of the Codere group, or that might be obtained under different transaction structures. The Company's shareholders are reminded that: The terms of the Restructuring were approved at the shareholders' meeting held on 11 May 2021 by shareholders representing 83.7% of the share capital. The Restructuring will result in the operating part of the Codere group being transferred to a new holding company ("New Topco"). New Topco will be 95% owned by the Senior Noteholders, and the remaining 5% of the equity in New Topco will be owned by the Company. In addition, the Company will receive warrants (the "Warrants"), permitting it to subscribe for non-voting shares with an economic value of up to 15% of the net equity proceeds of New Topco following a sale, listing, or certain other circumstances, above a strike price of €220m (subject to dilution for a management incentive plan and other customary upward and downward adjustments). The Warrants will have a 10-year term. The transfer of the ownership of the operating part of the Codere group to New Topco referred to above will be carried out through an enforcement of the existing security over the shares in Codere Luxembourg 2 S.à r.l. by the security agent for the Notes. This security is governed by Luxembourg law, and is a security under the financial collateral directive (equivalent to a Spanish pledge under the Royal Decree Law 5/2005). Following completion of the Restructuring, the Company anticipates that it will enter into a liquidation process. Accordingly, it is likely that the Company will be delisted, and subject to detailed structuring (to be agreed), shareholders may elect to receive their payment in the liquidation either in shares in New Topco or cash, in the latter case as a result of selling the shares that would otherwise be distributed to these shareholders. 2 Avda. de Bruselas, 26 28108 Alcobendas Madrid Telf: 91 354 28 00 Ángel Corzo Chief Financial Officer Additional Information about the Business Combination and Where to Find It Codere Online, DD3, and the other parties thereto have entered into a business combination agreement that provides for DD3 and Servicios de Juego Online, S.A.U. to become wholly-owned subsidiaries of Codere Online Luxembourg, S.A. (“Holdco”) (the “Proposed Business Combination”). In connection with the Proposed Business Combination, a registration statement on Form F-4 (the “Form F-4”) is expected to be filed by Holdco with the U.S. Securities and Exchange Commission (“SEC”) that will include a proxy statement to be distributed to stockholders of DD3 in connection with DD3’s solicitation of proxies from DD3’s stockholders in connection with the Proposed Business Combination and other matters to be described in the Form F-4, as well as a prospectus of Holdco relating to the offer of the securities to be issued in connection with the completion of the Proposed Business Combination. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE FORM F-4 AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. After the Form F-4 has been filed and declared effective, the definitive proxy statement/prospectus will be mailed to DD3’s stockholders as of a record date to be established for voting on the Proposed Business Combination.