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Annual Report & Accounts 2015 - NOTES
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24.7 Betit call/put option on 14 may 2014, the Group acquired a 15% stake in Betit holdings limited ('Bhl') from Betit securities limited ('Bsl'). the Group has a call option to acquire the balance of the outstanding shares. the call option can be exercised no earlier than 1 July 2017 and no later than 30 september 2017, and would be subject to further maltese Gaming authority clearance and the london stock exchange Rules. the minimum call option price is €70 million, and the actual price would be determined by the mix of revenues between regulated and non-regulated markets and certain multiples attaching thereto which at our current multiple levels would lead to the transaction being accretive for shareholders. if the Group decides not to exercise its call option Bsl may require the Group to acquire its shares in Bhl at a price determined by the mix of revenues between regulated and non-regulated markets and certain multiples thereof (but absent any floor on the price). Completion of this purchase would be subject to certain conditions including the Group's ability to raise the necessary financing. should the Group fail to raise the required financing, Bsl may acquire the Group's shares in Bhl for nominal consideration. these options have been valued based on expected future cash flow projections and using a monte Carlo valuation model. in addition there were two commercial factors relating to regulatory and financing matters which were not initially factored into this valuation model. the calculations of the options values and the estimated future economic life of the assets involve, by the nature of the assets, significant judgement. the Group has applied a discount based on the probability of the put option being fulfilled based on these commercial factors, of 15%, which requires significant judgement on behalf of management. 24.8 share options accounting for share option charges requires a degree of judgement over such matters as dividend yield, and expected volatility. Further details on the assumptions made by management are disclosed in note 20. 24.9 embedded derivatives the drawn-down loan contains embedded derivatives. the interest rate on the loan is eURiBoR, subject to a floor of 1%, plus a margin of 11.5%. the 1% floor represents an embedded derivative which has been valued at the year end. management assess the value of this embedded derivative to be immaterial. in addition, the loan may be repaid early but if it is repaid in the first year, there is an additional 'make-whole' premium. if it is repaid before the expiry date, the payment of the exit fees is brought forward but additional fees at the 12 month and 18 month date could be avoided. these options for early repayment have been grouped for the purposes of evaluating the embedded derivative. management assess the combined value of these derivatives to be immaterial. there are also embedded derivatives in the undrawn portion of the loan. in the opinion of management, these are outside the scope of recognition under ias 39. 25. GoinG concern the Group's business activities, together with the factors likely to affect its future performance and position are set out in the Chairman's, Chief executive's and Group Finance director's statements. Note 21 to the financial statements sets out the Group's financial risk management policies, and its exposure to credit risk and liquidity risk. the directors have assessed the financial risks facing the business, and compared this risk assessment to the net current assets position and dividend policy. the directors have also reviewed relationships with key suppliers and software providers and are satisfied that the appropriate contracts and contingency plans are in place. the directors have prepared income statement and cash flow forecasts to assess whether the Group has adequate resources for the foreseeable future. the directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the consolidated financial statements. 26. sUBseQUent eVents 26.1 acquisition of bwin.party it is part of the core strategy for the Group to improve the quality and mix of the Group's earnings through acquisitions, especially where these increase the markets in which the Group trades and where there are opportunities for high levels of cash generation through synergies. on 1 February 2016, the Group acquired 100% of the share capital of bwin.party digital entertainment plc ("bwin.party"), an online gaming company traded on the main market of the london stock exchange and listed on the official list (Premium segment), for total consideration of €1,508.2 million as set out in the table below. the acquisition resulted in GVC obtaining control of bwin.party from 1 February 2016, and this will be accounted for as a business combination in the year ending 31 december 2016. GVC HOLDINGS PLC ANNUAL REPORT 2015 85 notes to the consolidated financial statements