Tekkorp Asking Investors for Extension as it Scrambles to Enter Illinois

Special purpose acquisition company (SPAC) Tekkorp Digital Acquisition (NASDAQ: TEKK) is asking investors to vote in favor of an extension proposal at an upcoming shareholder meeting. That action would give the blank-check firm more time to complete a business combination.

The Las Vegas-based SPAC   That s the time frame in which blank-check companies have to find merger partners or face liquidation, unless investors sign off on an extension. Tekkorp Digital raised about $300 million in its initial public offering (IPO).

The purpose of the Extension Proposal and, if necessary, the Adjournment Proposal, is to allow us additional time to complete our initial business combination,” according to a Schedule 14A filing with the Securities and Exchange Commission (SEC).

Reports that Tekkorp was in talks to merge with Caliente Interactive in a transaction said to be worth $2.5 billion. In July, Playtech the parent company of Caliente Interactive pulled the plug on the deal, citing deteriorating capital market conditions.

In the SEC filing, Tekkorp acknowledges that it’s still in discussions with Playtech regarding a potential combination with the Caliplay unit, a Mexican sportsbook operator. The SPAC cautions these talks don t center around the originally planned reverse merger.

We are continuing to evaluate business combination opportunities, including alternative opportunities with Caliente, Caliplay and Playtech. While we continue to evaluate and discuss business combination opportunities, our board of directors currently believes that there will not be sufficient time before Oct. 26, 2022 to complete our initial business combination,” according to the regulatory document.

Suppose investors don’t approve the extension at the Oct. 13 shareholder meeting. In that case, Tekkorp will wind down operations and return capital to investors, marking the latest failure of the once hot SPAC/gaming industry combination. Recently, European and SPAC Cohn Robbins Holdings (NYSE: CRHC) halted merger plans, as just one example of the blank-check thaw in the wagering industry.

Much of the impetus for bringing Caliente Interactive public is the operator’s pursuit of an online sports wagering license in Illinois. That state charges a hefty $20 million for an online/mobile sports betting permit if the applicant doesn’t have ties to a land-based casino in the state.

A merger with Tekkorp would ease that financial burden for Caliente a hurdle that needs to be addressed. Last December, four companies applied for online-only licenses in Illinois. But Caliente is the only one remaining from that group. Its fate largely hinges on making something work with Tekkorp.

Despite the $20 million licensing fee, the allure of Illinois is understandable for operators. The state is, as expected, the sports betting hub of the Midwest and is tussling with the likes of New York, Pennsylvania, and Nevada for the largest monthly handle in the US.