Lottomatica to seek deals outside Italy

Lottomatica IPO, GAN’s new creditor, DraftKings analyst take, Entain’s share price lag, sector watch – sports streaming +More

Earnings+More

Apr 21, 2023

Good morning. On the Weekender agenda:

Lottomatica talks up M&A prospects in €3bn float prospectus.
GAN gets a new creditor in Sega Sammy.
DraftKings is tipped for a “sharp ramp” into profitability next year.
Entain’s share price has struggled to keep pace with rival Flutter.
Sector watch looks at DAZN’s bid for EFL soccer.
Jobsboard by BettingJobs includes Head of IT and Africa MD.

Float on.

Lottomatica IPO

The Italian gaming giant confirms approval for its $3bn listing in Milan.

Forza Milan: The Apollo-owned omni-channel betting and gaming shares have been admitted to the Milan Euronext exchange, with a bookbuilding effort planned for next week aiming to raise €600m. The proceeds will go towards repaying a shareholder loan and a portion of the company’s debt. The shares will be priced at €9-€11.

M&A will be on the agenda after the prospectus confirmed Lottomatica had €350m of liquidity available under its current debt arrangements for further deals.
Net debt stands at €1.29bn.
The prospectus stated it “continues to monitor opportunities” in regulated markets internationally.
Lottomatica said it has a “well-tested, disciplined M&A playbook” having previously welded together the Lottomatica sports-betting and Gamenet businesses in a €956m deal in Dec20.
In November last year it completed the acquisition of Betflag for €310m.

Lottomatica generated revenues of €1.39bn and adj. EBITDA of €460m in 2022 across its three online, sports-betting retail franchise and gaming retail franchise propositions. It is the number one operator in Italy with ~27% market share and claims “Italian national champion” status.

In online it controls 17% share of the market ahead of Flutter-owned Sisal and the Playtech-owned Snaitech.
In retail its three branded operations Better, Intralot and GoldBet control 33% of the market, while its VLT and AWP franchise arm is worth 30% of that market.

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ICYMI

In Compliance+More this week, we discussed the questions raised by the English Premier League’s decision to phase in a ban on shirt sponsorships by gambling companies.

In Earnings+More’s latest edition of Due Diligence on Tuesday, we analysed the issue of how Playtech’s B2B arm is performing given what we know about the importance of the possibly departing Caliente.

In Sharpr this week, there was a look at Esports Entertainment’s restructuring as announced by CEO Alex Igelman in a letter to shareholders, which included a renewed focus on B2B provision in esports.

Sharpr

Esports Entertainment Group to “renew” esports focus amid restructuring

Hi everyone, and hello from sunny Charleston, South Carolina. My partner and I are down south for a week trying this digital nomad thing out. We arrived today and I’ve been awake since 3:00 a.m. so my thoughts are probably a bit skewed, but I do find myself missing the home routine that sets my day off right. Will provide an update on the latter half of …

2 years ago · 2 likes · 2 comments · Cody Luongo

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GAN’s new loan

GAN has agreed a new $30m debt arrangement that sees Sega Sammy come on board.

Sega mega drive: As part of the complicated transaction, previous debt holder Beach Point Capital will see its original 14% interest rate $30m loan repaid, with the Japanese-listed gaming entity Sega Sammy taking over as the creditor.

As part of the deal, Sega Sammy also added an additional $12m to the loan to pay Beach Point’s fees and for general corporate purposes.
The interest is now set at 8%, with the maturity also pushed out three years.
Analysts at Macquarie said the change in debt arrangement would save GAN ~$2m a year in debt service payments.

Recall, GAN CFO Brian Chang said during the company's Q4 earnings it could violate financial covenants on the $30m loan. At the same time it announced a strategic review, saying it would be concentrating on sportsbook backend provision and Coolbet’s LatAm B2C operations.

It also withdrew from games RGS provision and brought to an end a distribution deal with Ainsworth, taking a $197m non-cash charge in the process.
Macquarie said the tie with Sega Sammy “indicates a new strategic partner” and could be the precursor to a potential asset sale.

A’s coming to Vegas

Las Vegas is set to gain a Major League Baseball team as the A’s enter into an agreement to purchase a parcel of land near the Strip.

Stealing base: The Oakland A’s will set up home on the site of the former Wild, Wild West property after buying the land from Red Rock Resorts for an undisclosed sum. The A’s plan to build a 35,000-seat stadium, which they would move into by 2027. Red Rock would retain an area of the land for its own future development.

The plan still needs to pass the Nevada state legislature.
Funding proposals include the creation of a special taxation district covering the stadium site, which means the state won’t have to raise taxes.

Home run: CBRE suggested being the new home of the A’s would bring in more visitors, albeit not at the same magnitude as the Raiders and the Allegiant; estimates suggest up to 70% of the average attendance would be locals.

Further, adding another major league sports team adds to the “long-term thesis for continued population and economic development in Las Vegas”.

LVS plaudits

Confidence is flowing after Las Vegas Sands issued its forecast-busting Q1s.

Don’t stop me now: Having less reliance on junkets vs. its peers prior to the pandemic and a higher mix of direct VIPs has helped LVS gain market share in the premium segment, according to Roth MKM analysts.

The team doesn’t believe these gains are sustainable, however, even if the Londoner and Four Seasons properties have “rebased” VIP market share above 2019 levels.

Fat of the land: CBRE said the EBITDA recovery “surprised on the upside” with margins at 31%. “This gives us confidence margins could eventually exceed 2019 levels when revenue more fully recovers,” the team added.

They also said momentum should have continued into Q2 as March had been the best month in the quarter.
The ”significant caveat” is constrained room capacity, though this should “dissipate” as 2023 progresses.

Profits watch

DraftKings will see a “sharp ramp” in profitability going into next year, suggests Morgan Stanley.

Inflectious: As a market leader and bellwether stock, DraftKings is the “most levered” to the move towards profitability, given its sustained market share and the amount of short interest with investors still focused on the negatives.

The team noted that DratKings, alongside its peers Caesars, Barstool and BetMGM, all guided towards their first quarter of profitability at some point this year.
These forecasts are predicated on the easing of promotional intensity and the slowing cadence of new state launches.

The shares week

Entain enjoys an earnings-led bounce but it still badly lags its main rival Flutter.

Faraway, so close: The near 7% gain this week displays some faith in the company following its Q1 trading update on Tuesday but that doesn’t extend to closing the gap on major rival Flutter.

The head-to-head shows Entain lagging by over 30% in the YTD performance, while over the past year it is still down 12% vs. the 84% rise enjoyed by Flutter.
Analysts at CBRE noted the underlying numbers were weak with revenue growth ex-acquisitions at only 1%.
But they added that excluding regulatory headwinds in Germany and the UK, growth was a more respectable 6%.

🐢 Entain struggles to keep up with the US-bound Flutter

Monster magnet: Peel Hunt noted Entain’s M&A strategy was “not only driving growth, it is driving scale” while also helping Entain to diversify into higher-growth markets. CBRE said M&A is “more than making up for regulatory impacts”.

“We believe more international sub-scale operators could find themselves on Entain’s dinner plate in the near future, with the right valuation of course.”

Sector watch – streaming

The auction process currently underway for the rights to show English Football League games has the potential to transform soccer broadcasting in the UK.

A watershed moment: Under the current system in the UK, broadcasters are disallowed from showing 3pm Saturday games for fear it will diminish the number of spectators in stadiums.

But according to a report in The Times in late March, disruptor DAZN is vying to win the rights to the English lower division with a bid that offers the prospect of showing every EFL game live.
As the paper pointed out, this would place the English Football League with something of a dilemma as it tries to balance matchday revenues against potential broadcast income.
DAZN backs itself to handle the technical challenges involved in streaming every game.
Recall, DAZN signed a deal with the NFL in February to broadcast every NFL game to subscribers ex-US.

What’s on TV: DAZN faces tough competition in the race for the rights. Current EFL broadcast partner Sky will be putting itself forward once again. This season it will broadcast 138 games plus the play-offs.

Also putting its hat in the ring is Viaplay, the Nordic streaming provider, which itself to date has the UK rights to the Euro qualifiers for the Scottish, Welsh and Northern Irish national teams.

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