Entain leads hunt for PointsBet Australia

Entain leads PointsBet Australia race, DraftKings’ pay awards, Flutter sets dual listing date, startup focus – Golden Heart +More

Earnings+More

Mar 27, 2023

Good morning. On today’s agenda:

Entain now thought likeliest buyer of PointsBet’s Australian business.
DraftKings founders’ $$$ pay awards.
Flutter gets the go-ahead from shareholders for a US dual listing.
The startup focus is charitable games provider Golden Hearts Games.

Australia, the chance of a lifetime.

Entain in PointsBet Australia bid

Operator is looking to expand its Australian footprint via PointsBet acquisition.

Buy and build: Entain is heading up the list of bidders for PointsBet’s up-for-sale Australian arm, according to multiple sources. A buyout would augment its existing Ladbrokes and Neds operations in the country, with sources suggesting the price tag will likely be lower than the previously touted A$250m.

Entain has replaced the Matthew Tripp-led Betr as the likeliest buyer.
It was previously reported to have raised A$250m to fund a bid for the Australian-facing PointsBet trading arm.
Tabcorp is also thought to have dropped out of the race.
Sources also suggested Betr might be in the sights of Entain, given it recently saw backer News Corp refuse to take part in an additional funding round.

Background: PointsBet confirmed a newspaper report in late December that it was in discussions with Betr regarding a potential deal for its Australian trading business. It said at the time that discussions were “incomplete and preliminary in nature”.

What’s it worth? The Australian element of PointsBet's business generated revenue of A$95m in H123 and a negative adj. EBITDA of A$20m, 25% worse than the prior-year period. PointsBet said the business had faced a tougher competitive environment in H222, not least from high-spending new entrant Betr.

Entain stated in its recent FY22 earnings that Australia was worth £463m. It said revenues from Australia grew 8% in constant currency terms and that its two brands controlled 18% of the market.
On the recent earnings call, CEO Jette Nygaard-Andersen noted “some noise in the market” in the second half of the year.
She also added that Entain’s M&A pipeline was “exciting as always”. Its annual report published last week said the board had discussed M&A strategy in Australia.

Reaction: A spokesperson for Entain offered no comment. A PointsBet spokesperson said when “proposals for a buyout or takeover arise we consider each on their merit and their potential to maximize value for our shareholders”.

“We believe further industry consolidation is inevitable and we’ll position PointsBet to take advantage of movement in the sector,” the statement added.

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DraftKings’ pay awards

Founders take $1 salaries but receive multi-million dollar bonuses and share awards.

💰 Pay dirt: Jason Robins, Matt Kalish and Paul Liberman each opted to receive only $1 in salary for 2022 but bonuses and share awards meant total compensation between the three hit $130m.

Robins received $47m last year including $44m of share awards, while Kalish received $41m including $40m in shares and Liberman also got $41m including $40m in shares.
Robins’ total compensation for 2021 was $14m, while Kalish and Liberman received $11m each.
CFO Jason Park received total compensation of $15m including $13m of share awards.
According to the company’s 14-K published on Friday, the three will continue with their $1 salaries for 2023.
The bonuses awards were determined by a mix of revenues and adj. EBITDA targets, while long-term incentive plans set out in Dec20 were also triggered.

✈️ Lifestyles of the rich and famous: Robins’ package included $1m compensation to pay for personal security at the offices and his home as well a requirement that he and his family only fly by private jet.

Flutter sets the date

A formal resolution to facilitate a dual listing in the US will be put before shareholders next month.

All those who say aye: Flutter said it had received “very strong support” from institutions representing a “significant majority” of Flutter’s shareholder base for the proposal to seek a dual listing in the US. The company said it will put forward resolutions at its AGM on April 27 that will make the necessary changes to its articles of association to facilitate the move.

The resolutions will require the approval of 75% of the votes cast by Flutter shareholders. Should this be achieved, Flutter said it will aim to implement the additional US listing during Q4 2023.

The week ahead

The latest edition of the E+M Data Month will be sent on Tuesday. Looking into the latest monthly data on FanDuel’s iCasino operations in the three main states of Pennsylvania, Michigan and New Jersey, this edition looks into what appears to be the company’s incremental market share progress in two of the three.

Meanwhile, GAN reports its Q4 earnings on Thursday when it can be expected to divulge more about its Coolbet B2C business quitting Ontario.

Better Corrective

On Thursday, we incorrectly stated and misascribed comments that Better Collective’s VIP levels had dropped to below 20% vs. 50% in 2018. This was incorrect. The number was referring to the company’s single company exposure. We apologize unreservedly for the error.

Earnings in brief

STS Q4 revenues rose 43% YoY to PLN167m while adj. EBITDA surged by 122% to PLN83m, thanks to a renewed focus on its home market after exiting the UK and Estonia markets this year.

Analyst takes

Inspired: JMP noted the deal announced late last week with Aristocrat that will see Inspired develop virtual NFL content, and pointed out that this might help Inspired reach an agreement across its virtual sports offering with FanDuel.

Inspired already has DraftKings and BetMGM tied into long-term deals.

The shares week

What price a fine? Kindred’s share price appeared to suffer little ill effects from the news last week of the £7.1m fine levied by the UK Gambling Commission for various RG and AML failures.

🤔 Kindred’s share enjoys a good week despite the news flow

On social

You made your bed: Chris Grove went on Twitter late last week to make the point that the current bad press coverage of the sports-betting sector sees a lack of pushback with no one prepared to play defense as opposed to offense. “Who is speaking for the industry?” he asked.

Chris Grove @OPReport

1/ We are ~six months into a wave of negative mainstream coverage of sports betting. The coverage mixes a handful of legit observations w/ misunderstandings, misstatements, misrepresentations, and hyperbole. As bad as the coverage is, our industry largely made this bed.

Startup focus – Golden Hearts Games

Who, what, where and when: The Boston-based iCasino developer and operator of promotional games for charity was founded in August 2020 by Steve Kane and Jeremy Shea. “Promotional games as we offer them are innovative but the category is actually quite old and for decades has been legal everywhere in the USA,” says Kane.

Funding backgrounder: Investors include Sharp Alpha, Accomplice, Boston Seed Capital, NED and several family offices and individuals. The company hasn’t disclosed details about its funding.

The pitch: Kane, who acts as CEO, says the opportunity is two-fold; first, by leveraging the ‘legal, everywhere, right now’ opportunity afforded by promotional games, capturing the fun and engaging aspects of social games, and, second, by doing well by doing good.

He says the company is “taking the firehose of audience interest and usage of digital games and directing that to the support of charities and good causes”.
70% of charitable giving in the USA comes from very small donors, who are the most expensive and difficult for charities to reach, he adds.
“We bring those people and the world of charities together where the people already are – playing games online and on their phones.”

What will success look like? Success for Golden Hearts Games is to be a huge, popular, profitable, promotional games, iGaming company and platform. “No more, no less,” says Kane, who adds Golden Hearts could become “one of the most reliable, continuous, significant sources of funding for USA non-profits”.

Happyhour.io startup survey

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M&A Newslines

A sale of Belgian sports-betting firm Betfirst is likely after parent media group Sagevas asked Rothschild Bank to look into its strategic options, SBC reports. Betfirst is one of the top three operators in Belgium with both online and retail operations.