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Flutter bids for top spot in Italy with Snai talks
Playtech and Flutter in talks over potential €2bn deal.
In +More: DraftKings’ week gets worse.
Evoke talks reset after confirming a poor first half.
Flutter takes the analysts’ plaudits after its Q2 earnings.
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Podium hunting
When the moon hits your eye: Playtech saw its share price soar by over 22% at one point on Wednesday before settling for a near-14% rise after it admitted it was in exclusive talks with Flutter about a potential deal to sell its Italian B2C business Snai.
Flutter saw its UK shares rise in sympathy, up as much as 13% in early trading, while the US price was up 10% on open.
That’s amore: The Playtech stock exchange statement came after a report from Sky News suggested the pair were in talks about a deal that would value Snai at ~£2bn or €2.3bn. Flutter also released a statement confirming the discussions.
Neither company claimed there was any certainty a deal would ultimately be agreed.
When asked about potential M&A on Flutter’s earnings call this week, CEO Peter Jackson said the company was “happy to make acquisitions in this market if we think it will help us.”
Numero uno: Analysts at Investec suggested the multiple would be ~8.5x, which was “high” for an Italian business but “consistent with the strategic logic” of seeking the #1 position in Italy.
In FY23, Snai generated revenues of €947m and adj. EBITDA of €256m.
On the Q2 earnings call on Tuesday, CEO Peter Jackson noted the success Flutter has enjoyed with Sisal since it acquired the business for €1.91bn in December 2021, pointing to revenue growth of 37% since the buyout was completed in August 2022.
He said the introduction of same-game parlays to the Italian market for the recent Euros tournament had helped to deliver record market share for Sisal.
According to Q1 data from the Italian authorities, Snai is in third place in Italy with 9% market share, behind Lottomatica’s brands, which – once its recent SKS acquisition is incorporated – will have 29% share.
Flutter’s existing cohort of brands is next with 21%, meaning any deal would nudge its share beyond Lottomatica.
An unknown is exactly how the Italian competition authorities would view the move.
🥇🥈🥉 Italian online market shares in Q1
It’s complicated: Playtech has been the subject of longstanding M&A interest including a £2.7bn takeover bid from Aristocrat, which was rejected by Playtech’s shareholders. A bid from TTB Partners, which included Playtech CEO Mor Weizer, likewise eventually foundered in late 2022.
Moves have also been stifled by the ongoing legal tussle with Caliente surrounding its supply deal with Caliplay in Mexico.
Investec said selling Snai would leave Playtech as a “formidably cash rich” pure B2B provider.
It is worth noting the rumored price tag is more than Playtech’s entire market cap of ~£1.9bn.
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+More
You’ve got mail: DraftKings’ week went from bad to worse after the company erroneously sent out an email about dead-heat golf bets to its entire subscriber base. The subsequent traffic spike caused DraftKings’ site to go down during the day on Wednesday.
The day before, the company announced it would not be imposing a player surcharge in high-tax states after all.
UK-based affiliate provider QiH has made its debut in the sports-betting market with a site called Podium Bets, which will initially cover horseracing, football, boxing and the NFL.
Southern Star: The UK bookmaker Star Sports has received a license to operate in Victoria, Australia.
Evoke earnings
Remodel: CEO Per Widerström said Evoke was “undertaking a total reset of the business” after the company suffered the predicted punishing 67% fall in EBITDA in H1 to £43.8m, which he said was “not where the business wanted to be.”
Revenue for the half came in at £862m, down 2%.
Recall, Evoke had warned in mid-July on its H1 numbers after admitting a marketing blitz at the start of the year had failed to ignite the business.
The company said today marketing had increased 12% over the period.
Adjusted for the costs of the exit from the US, EBITDA was down 26% to £116m.
Ad break: Widerström was keen to promote the early Q3 figures, which the company said was in line with previous guidance of growth between 5% and 9%. It added the percentage of revenue spent on marketing would fall to ~18% vs. the 25% in H1.
Best in show
The power and the glory: Analysts were cooing over Flutter’s debut earnings since it completed its US primary listing in May, with the company comfortably taking the prize and the plaudits for its Q2 performance.
The team at JMP noted the “impressive” US performance, despite the slight slippage of US iCasino share in Q2.
Total US sequential growth came in at 8%, which the team said was the “best growth rate in all US gaming.”
Revenues were also 7% ahead of consensus while the adj. EBITDA beat was 37%.
Against the tide: For CBRE the raised guidance for the year was all the more impressive given the headwinds, including the negative impact from higher taxes in Illinois (~$40m), new customer spending (~$20m) and higher payment processing fees (another ~$20m).
As noted on the analyst call, FanDuel expects to mitigate half the estimated $100m EBITDA impact from Illinois taxes in 2025, largely through reductions in player generosities and marketing.
Additional upside could come if FanDuel captures share from subscale operators.
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London weighting
Top ranking: A return of London casino traffic and the potential for the new UK government to get around to the already announced land-based gaming reforms leaves casino-to-bingo operator Rank on a sounder financial and strategic footing, according to CEO John O’Reilly.
By the numbers: Revenue for the financial year to June rose 9% to £734m while underlying operating profit soared by 131% to £46.5m.
Revenues for the venues business was up 8% to £508m while the digital arm rose 12% to £226m.
London casino revenues were up 10% vs. 8% for the rest of the UK.
Earnings in brief
Golden Matrix: Post the reverse takeover by Meridianbet, the company achieved a 75% increase in Q2 revenue to $39.4m while adj. EBITDA was flat at $5m. CEO Brian Goodman said the integration of Meridianbet had been “seamless.”
The Ontario-focused NorthStar Gaming saw revenue rise 61% in Q2 YoY to C$7.5m ($5.5m) while net losses came in flat at C$4.7m. The company said it outpaced market growth in Ontario with total wagers up 42% vs. the market’s 32%, while GGR rose 58% vs. 34% for the sector as a whole.
Swept away
And even if I could, it’d all be gray: Catena Media’s new CEO Manuel Stan and his all-new management team have a mammoth task ahead of them, trying to turn around what was once a market leader in betting and gaming affiliation.
But one area clearly identified as displaying growth potential is sweepstakes.
While total revenues fell 11%, the casino segment saw revenues rise 3% YoY driven by sweepstakes affiliation, which accounted for a third of revenues.
I’m always touched by your presence, dear: The sweepstakes focus comes at a moment when Catena is hoping to diversify its portfolio away from a reliance on new state-by-state launches.
In practice, Stan suggested, it means building up a brand presence in social casino and sweepstakes alongside an effort to engage with Spanish-speaking audiences in the US and the upcoming launch into sub-affiliation with Mrktplays.
But it is sweepstakes that Stan said was the “fastest-growing vertical.”
While capitalizing on that, Catena is also taking the long view on building brands that can position the company post-regulation.
Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.
Calendar
Aug 15: Gambling.com
Aug 21: Better Collective (earnings)
Aug 22: Better Collective (call)
Sep 25: Flutter investor day
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