The $10bn price tag
A ‘cleaned up’ bet365 could be an acquisition target
DraftKings ‘most likely buyer’ should bet365 ever come up for sale.
In +More: Star extends exclusivity period for Salter.
OpenBet MBO completed, Endeavor exits the gambling space.
Venture playground: Letzz in focus.
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The family silver
Clearing the decks: bet365’s move to exit the Chinese-facing dotcom business removes one of the potential obstacles to a sale of the company should the owners, the Coates family, ever be looking for an exit.
The news on Monday that the company was closing down its customers in China and other Asian dotcom markets sparked speculation about bet365’s long-term future.
The 90/10 rule: The analysts at Regulus Partners suggested the closure of bet365’s “last material dark gray market” meant that, following the regulation of the Brazilian market, bet365 could now claim more than 90% of its revenues come from domestically regulated markets.
The team added that revenues from China had been “waning in importance” for over a decade, from being the second-largest market after the UK to below 5% now.
“As a controversial and increasingly difficult market to operate in, China has therefore become relatively easy for bet365 to exit,” Regulus said.
Carry on only: Sources were quick to suggest that a business largely cleansed of its black market positions could potentially be more attractive to potential suitors.
As per a comment from a source in January, any sale process would only occur if the Coates family “fell out of love with the game.”
At bat: As it stands, the company’s ambitions appear evident. This week it announced it will become the official sports-betting partner of MLB’s St. Louis Cardinals ahead of Missouri’s legal sports-betting launch later this year.
A truth universally acknowledged: However, if an exit were being sought, a sale would be far more likely than an IPO and with a very short list of potential acquirers.
At the front of the queue would be DraftKings, which as one industry source suggested is the “only real buyer” for a business of this size and footprint.
In possession of a good fortune: As for the price tag, one corporate advisor suggested a multiple similar to the 18x of Flutter’s current LTM adj. EBITDA would be appropriate. “It’s the top betting brand globally and massively profitable,” they added.
In January, the company released its accounts for the year to March 2024 showing revenues up 9% to £3.7bn and operating profits of £396m.
An 18x multiple would value bet365 at ~£7.2bn or ~$9.3bn. “It’s at least that multiple, maybe more,” suggested the advisor.
“This is a $10bn business,” said another industry investment specialist.
Could be tempted: A move for bet365 would mark a huge strategic shift for DraftKings, whose CEO Jason Robins said during a recent investor conference that M&A this year was a “big if,” adding that with regard to any international ambitions it “doesn’t feel like it has to be now.”
Further questions revolve around how DraftKings would pay for a deal of that size. As of the end of Q4, it had unrestricted cash on the balance sheet of $788m.
It also had $490m of an existing revolver facility unused and recently tapped up the credit markets for $500m.
Pick and mix: “Being US listed is an enormous benefit for DraftKings and if priced right then the cash will be there,” said Paul Leyland from Regulus, who suggested a mix-and-match of cash and equity would be used to finance the deal.
“I suspect there is a cash price and an equity sweetener,” he added. “Cash for what the family thinks it’s really worth and equity for the synergy value and market premium. That creates a win-win if they really want to exit.”
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+More
April fool: Star Entertainment has extended its exclusivity period with property development group Salter Brothers over a potential $750m refinancing to April 1. The refinancing is part of a three-part package, including a sale of property in Brisbane to a Hong Kong entity and a $250m bridging loan from a New York-based financier called King Street.
New model: Flutter has confirmed that as of its Q1 earnings report it will be reporting only two segments, the US and international, with the latter comprising the previously reported segments of the UK & Ireland, Australia and the old international elements of the business. The move was previously announced at the time of its Q4 report. Notably, Brazil will be broken out within the reporting, alongside UK&I, southern Europe, Asia-Pac, central and eastern Europe and other regions.
Going to Rome to see the Pope: Frank Fertitta, the new US ambassador to Italy, has marginally raised his stake in Wynn Resorts to just under 12% via a purchase of 16.5k shares. To take up the posting in Rome, Fertitta has resigned as CEO at Fertitta Entertainment.
Pollard Banknote has acquired US charitable bingo supplier Pacific Gaming for $10m, funded from existing cash and senior credit facilities.
In brief
Golden Matrix: The operator behind Meridianbet said revenue rose by 14% YoY to $106m. Online grew by 18% to $80m while retail was up 4% to $23m. Within that, iCasino leapt by 24% to $43m while revenue from the in-house iCasino studio Expanse rose 174% with the launch of new games aimed at the sweepstakes sector. Q125 revenue is guided to $42m-$45m.
What we’re reading
“We live with dysfunctional legal and regulatory attitudes toward gambling and investment that are rooted in a morality few people accept today and that never made economic sense.” Aaron Brown from Bloomberg gets to grips with the reality of Robinhood opening up March Madness markets.
Earnings edit
Evoke
Hallelulah chorus: The UK-listed operator behind William Hill and 888 has pulled itself up by its bootstraps and produced revenue growth for the first time in three years, albeit by a modest 3% to £1.75bn.
The good news keeps coming: A further boost comes with the news that H2 adj. EBITDA soared by 33% YoY to £197m, up a whopping 71% sequentially.
UK & Ireland online revenue was back to growth, up 5% YoY with 10% growth seen in H2, while international online was up 10% YoY.
The only negative came from UK retail where revenues fell 5% for the full year, albeit with sequential improvement in H2.
The company said Q1 growth was “robust” but at low single-digits was below the 5-9% FY25 target.
E+M Pro subscribers will receive an Earnings Extra newsletter covering the earnings call later today.
Open and shut
Closed: OpenBet has completed the MBO from previous owner Endeavor, backed by the latter’s CEO Ariel Emanuel and led by the team of Jordan Levin, who will head up the newly named OB Global Holdings.
Concurrently, Endeavor announced the completion of its acquisition by private equity giant Silver Lake.
Don’t let the door hit you on the way out: Following the deal last week that saw Sportradar take on the obligations of sports-betting data business IMG Arena in return of $125m of cash, it means Endeavor has brought to a halt its short-lived adventures in the gambling space.
Endeavor bought OpenBet from what was then Scientific Games – now Light & Wonder – in late 2021.
The original bid of $1.2bn was later negotiated down to $750m in cash and $50m in stock options.
Endeavor announced in November the deal to sell OpenBet to Emanuel and the management team for a knockdown price of $450m after a protracted sales process that is thought to have attracted limited bidders.
Levin said a “new chapter” had begun, with OpenBet “better positioned than ever.”
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Quick takes
Playtech: Ahead of its FY24 earnings tomorrow, the Peel Hunt team said the announcement late last week that the strategic agreement with Caliente over CaliPlay had passed muster with the Mexican antitrust authorities was the "first step in reducing the complexity” of the arrangement.
Going over the history, the analysts noted the previous dispute over ownership and payments has now been resolved.
It means Playtech will swap its profit share for an equity stake in a new US holding company from which it will receive dividends.
They added that, in due course, that business could IPO, meaning Playtech could “valorize” its shareholding.
Penn Entertainment: As part of its Consumer Bright Ideas event, the team at Macquarie hosted a meeting between Penn and investors, which, they said, “per usual” saw questions around the future of ESPN Bet.
Specifically, Macquarie reported, there were enquiries about how upcoming new features and integrations with ESPN would “drive more engagement through a more frictionless experience.”
The team reported that management reiterated the guidance provided at the time of the Q4 earnings, with interactive losses coming in at $100m-$200m for 2025 and assuming iCasino and OSB YoY market shares 3.5% and 4.7% respectively.
Venture playground
Growth company focus – Letzz
Who are you? Led by Daniel Gambin, co-founder and CEO, and Predrag Spasojevic, co-founder and CTO, Letzz is “focused on simplifying, optimising and automating compliance in the online gambling industry,” says Gambin.
What’s the big idea? “Fundamentally, we think #complianceisthenewcommercial,” proclaims Gambin. He adds that in highly regulated markets such as iGaming, rising compliance costs and complexities are “straining organisational and commercial performance.”
The product is intended to i) reduce the time, effort and cost of keeping compliant; and ii) enable more revenue through better and more proactive decision-making.
Strategic management of compliance is “essential for sustainable success, which is a departure from how we see it being managed today (cost centre and reactive),” says Gambin.
KPIs: Letzz is set to release “soon” the first version of a product that can reduce compliance research time “by up to 90%.”
Funding backgrounder: An undisclosed seed investment has enabled the company to develop its product and create and execute a market entry strategy.
Growth company news
Pro League Network has unveiled a new production studio and announced its new slate of entertainment programming, including a news magazine-style show PLN Report, a competition and betting preview show PLN Countdown and a comedic series highlighting PLN’s wildest moments Replay Riot.
Sports-betting data provider TXOdds is collaborating with market maker Lacerta Sports to integrate the latter’s price management service into its soccer and cricket pricing products.
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Upcoming earnings
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Apr 23: Churchill Downs (earnings)
Apr 24: Churchill Downs (call)
Apr 30: Evolution
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