Dec 23: Flutter buys itself a £1.62bn present

Flutter buys Sisal, GiG buys Sportnco, SciGames withdraws SciPlay offer, Ohio sports-betting gets Governor's signature

Dec 23, 2021

Good morning. The surprise news this morning is that Flutter has acquired Italian top three online and offline operator Sisal for £1.62bn. Gaming Innovation Group announced yesterday the acquisition of sports backend supplier Sportnco. There are issues between SciGames and SciPlay over ownership. Ohio’s sports-betting law gets the signature of the Governor.

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Flutter buys Sisal

The top line

Deal will see Sisal owner CVC receive €1.913bn/£1.62bn in cash.
In FY21 Sisal expects to generate EBITDA of €248m on revenues of €694m.
Deal will be financed by an additional debt facility.

All I want for Christmas… is a “gold medal position” in Italy. In the release announcing the deal, Flutter said the acquisition aligns with its strategy of building leadership positions in regulated markets. Along with the current market positions of PokerStars and Betfair, Flutter says that post-deal it will control ~20% of the online market. Sisal currently has an online market share of ~12%. It also has a nascent position in Turkey where it runs a lottery operation. That is projected to bring in €22m of EBITDA in FY21.

By the numbers: Of the 2021 projected Italian EBITDA (90% of total, remainder from Turkey), online represents 59% and retail 31%. The online mix is 59% gaming and 36% sports-betting while the retail mix is 57% gaming machines, 37% lottery and 6% sports-betting. Sisal also has c.1.700 retail outlets and a further 40,000 concession points/points of sale which Flutter said was vital given the advertising restrictions around gambling in Italy. Sisal operates on a proprietary tech stack. Flutter says the Italian online market is expected to be worth €3.6bn in 2024, equating to a 5 yr CAGR of 18%.

Un buon affare: The deal was welcomed as a “positive move” by analysts. “Firstly, it diversifies group revenues further and will position it as the leader in the attractive Italian market,” said Goodbody.

“Since advertising restrictions were introduced in Italy an omnichannel presence has become key,” Goodbody added. “We see significant opportunities for Flutter to implement its industry-leading risk and trading capabilities on the business; along with increasing Sisals online gaming content.”

Nice return you have there: CVC Capital Partners bought Sisal from another consortium of private equity houses for €1bn in 2016. The deal is expected to close in Q222.

“Over the last five years, thanks to CVC's support, we have successfully transformed Sisal into a leading digital and international gaming company,” said Francisco Durante, Sisal CEO.

On social

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GiG buys Sportnco

The top line

Price paid is €50.8m with €27.3m in cash and the rest in GiG shares.
Funding comes from a €25m investment in GiG from New Zealand casino operator Skycity Entertainment

Fitted up: GIG CEO Richard Brown said both companies complement each other when it comes to products and geographies. GIG is strong in the Nordics and the UK, while Sporntco holds “leadership positions” in southern Europe and is active in Latin America and the US. Sportnco’s revenues in FY21 are expected to come in at ~€9m with EBITDA of ~€5m. GIG will take on Sportnco’s current debt of €19.3m.

Booster: Brown said GIG has always had a “strong casino and PAM offering”, he added, but prospects were “not so enamored with the GIG sports offering”. Both groups’ player account management systems gave them extra flexibility as “existing GIG customers could launch in markets where Sportnco is already active and vice versa”. “It’s an accelerant; it has great strategic rationale and gives us strong growth opportunities.” He added that GIG’s media division (Q3 revenues up 30% to €11.2m) will be made available to Sportnco’s partner network to drive NDCs.

Scientific Games nixes SciPlay buyout

Playtime over: Scientific Games called a halt to the plan to acquire the 19% of SciPlay’s shares that it doesn’t already own, citing a wish to maintain its “prudent” approach to capital management and “disciplined M&A”. It will continue to retain its 81% stake (and 88% voting rights). Under the terms of the proposals, SciPlay shareholders would have received 0.25 SciGames share for every SciPlay share.

Walk on by: While analysts said they were surprised by the development, particularly given what Truist said was the “sense” behind the deal, they were also welcoming of the evident caution on display. “We also think this development speaks to management's discipline and the belief its shares are currently undervalued,” said Truist.

Jefferies added: “While we do believe that a deal between the two entities makes sense, and were surprised that a deal could not be met, this doesn't structurally change our view of its growth profile and investability to a broader population of investors than prior.”

Come back later: They added that following recent meetings with SciGames management, “we don't think SGMS is looking at any more transformational M&A and also don't think the deal being withdrawn changes anything strategically”. Recall, via the sale of the sports-betting backend business OpenBet (to Endeavor) and the lottery arm (to Brookfield), SciGames will be receiving ~$7bn in proceeds early in 2022. Truist added that they believe the deal might be revisited when the Scientific Games share price is higher.

Filling a vacuum: For SciPlay, it leaves it somewhat in limbo; the digital entertainment team at Truist said they expected it to concentrate on filling some key management positions left open during the process and increasing its investment via organic growth and potential M&A.

Ohio gets Governor’s signature

DeWine and roses: As expected, Ohio Gov. Mike DeWine has signed his state's sports betting bill. DeWine, a Republican, had supported legal sports-betting and worked with lawmakers in the GOP-controlled legislature to work through a bill. It means one of the nation's most populated states will have sports betting, likely sometime in 2022. The long-debated (and delayed) bill will be one of the nation's most expansive, allowing statewide mobile betting, retail casino books, in-stadium sportsbooks and potentially thousands of wagering kiosks.

Datalines

Pennsylvania: Land-based casinos hit revenues of $268.4m in November, up 47.6% YoY and 1.6% increase on Nov19. Sports betting handle was $761.6m, up 55% YoY but down 1.9% MoM. GGR was $84.9m, up 75% YoY and up just over 100.8% MoM, implying a win rate of 11.2%. Retail chipped in of $8.6m of the total. Promos were $21.3m or 27.9% of OSB GGR. Total NGR after promotions was $63.7m. iGaming GGR was $93.9m, up 57% YoY but down 8.7% MoM.

Newslines

44 and counting: Penn National has opened its fourth gaming facility in Pennsylvania, cutting the tape of the Hollywood Casino Morgantown. The 411m casino is Penn’s 44th property in North America.

DFL on the radar: Sportradar has signed a five-year extension to its partnership with Bundesliga International to supply its betting and streaming rights to the German Football League (DFL) outside the US and DACH regions. Sportradar will also provide bookmakers with a range of tools and features to enhance fan interactions such as video clips.

Rush hour: Inspired Entertainment and Rush Street Interactive have agreed a deal for the distribution of Interactive content to be made available in multiple North American jurisdictions, including New Jersey, Michigan and West Virginia.

X marks the spot: Geolocation and compliance technology company XPoint has announced a partnership with Sporttrade for geolocation services.

What we’re reading

The Goons: Arsenal get an ASA ticking off over token sale advertising. And on social, why Turkish inflationary worries hold the key to Socios success.