Deal Monday: Fanatics/PointsBet and Aristocrat/NeoGames
Fanatics’ PointsBet US acquisition, Aristocrat’s Neo surprise, affiliates move to center stage, analysts takes, startup focus – Pro League Network +More
Good morning. On today’s agenda:
Fanatics buys PointsBet US for $150m.
Meanwhile, Aristocrat buys NeoGames for $1.2bn.
The week ahead: Better Collective and Catena Media report this week.
Analyst takes covers IGT, Wynn Resorts, Bally’s and more.
Startup focus is the alternative sports provider Pro League Network.
Deal Monday
Fanatics has snapped up PointsBet’s US business for $150m while Aristocrat swallows NeoGames for $1.2bn.
While you were sleeping: The tectonic plates of the global gaming sector saw sudden moves overnight as first Fanatics announced it had bought PointsBet for $150m and then Aristocrat said an offer to buy NeoGames for $1.2bn all-cash had been accepted.
On Points: Under the terms of the Fanatics deal, the PointsBet business will be broken-up with Fanatics taking the US business while the Australian and Canadian arms alongside the proprietary platform remain. The cash consideration is A$222m or $150m.
What they get: Buying PointsBet gives Fanatics access to 15 states and ownership of the Ireland-based live odds provider Banach, which PointsBet bought in April 2021 for $43m.
It gives Fanatics small single-digit market shares in key OSB and iCasino states, including Michigan.
What they keep: PointsBet is left with the loss-making (and sub-scale) Canadian business and the Australian operation. It said both businesses combined would be EBITDA breakeven.
PointsBet will return the $150m to shareholders.
PointsBet retains its proprietary platform and trading operations as well as a perpetual license for the Banach assets outside of the US.
Aristocrat: The $29.50-a-share, $1.2bn deal sees the Australian gaming giant snap up the NeoGames iLottery-to-iGaming business for $1.2bn in cash.
The deal comes at a premium of 104% to the prevailing NeoGames share price for the past three months and comes at a multiple of 15x of the prospective 2023 EBITDA.
The deal is recommended by the board and is expected to close within 12 months.
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Out of the blue
Recall, Aristocrat’s last foray into putative M&A came in October 2021 with what turned out to be a failed £2.7bn bid for Playtech.
The financials: In 2022 NeoGames generated revenues of $210m, boosted in part by the acquisition of the Aspire Global betting and gaming supply business. Adj. EBITDA came in at $55m.
In its Q1 figures last week revenues rose 187% to $64m with $35m coming from iGaming, while adj. EBITDA was $20m.
Rocks off: Aristocrat has been building a presence online having previously bought the Roxor business for an undisclosed sum in September last year.
Not out of the blue
Fanning the flames: The heavily rumored deal for PointsBet sees Fanatics greatly augment its reputed US presence where its market access was limited to a handful of states.
The deal comes after Fanatics Betting & Gaming CEO Matt King spoke at the SBC North America show last week of the company’s ambitions to take “second-mover advantage” in the US.
That’s a capital idea: The Michael Rubin-led Fanatics is well-capitalized, having raised $700m in December for a valuation of $31bn.
Its ambitions to be a top player in the US are well-known and have been the cause of much speculation ever since ex-FanDuel CEO King joined the business in June last year.
At a loss: PointsBet’s US business for the HY23 generated net win of A$70m with A$51m of that coming from sports betting and A$19m from iCasino. It has a low-single-digit market share profile across most states with the exception being Illinois where it consistently achieved 5%+.
Rejection: Going by the share price reaction, down over 20% on the day, PointsBet shareholders aren’t keen on the deal.
Recall, previously PointsBet was the subject of strong rumors surrounding the future of the Australian business with Entain the latest company in the frame as a buyer.
😱 PointsBet shares down over 20%
The week ahead
The leading gaming affiliates take center stage.
Better Collective reports tomorrow where it will update on its stated ambition to become a digital sports media group. In a recent preview note, analysts at Redeye said they expected to see “continued solid growth”, which will include the launch of Ohio. But they are not so hopeful of the Massachusetts debut.
Redeye forecasts revenue of €83.9m and EBITDA of €31.4m, including the upside from Better Collective’s €45m acquisition of UK-based adtech company Skycon
Catena Media reports the following day and questions are likely to focus on the group’s ongoing strategic review.
Catena’s revenues were up 15% to €27m in Q4.
Fellow affiliate Acroud also reports that day.
Tuesday also sees the debut earnings statement from Lottomatica, which recently completed its €3bn listing in Milan. After a first day of dealing drop, the shares have since recovered some poise.
On Thursday, it’s the turn of Australian gaming machine and social gaming provider Aristocrat to report its half-year results.
E+M this week: On Tuesday, Due Diligence takes a look at the news that Kindred is undertaking a strategic review and asks what role activist investor Corvex will play.
Calendar
May 16: Better Collective earnings, E+M Due Diligence
May 17: Better Collective (call) Catena Media, Acroud
May 18: Aristocrat
May 19: E+M Weekender
Analyst takes
After another busy week of earnings, here’s a review of analyst takes.
Ain’t no pleasing you: For Deutsche Bank the results from Light & Wonder were “strong” but “uneventful” from a “new news perspective”. LNW’s Q1 EBITDA was $16m above DB forecasts, thanks to the gaming segment. Macquarie noted that gaming revenues were down low single-digits sequentially, in-line with IGT but slightly below PlayAGS.
Muscle beach: The Jefferies team said IGT’s gaming and PlayDigital units achieved momentum that enabled the group to flex its “lottery muscle” and create new demand and revenue streams in Q1.
However, US lottery business had moderated due to consumer fatigue following the $1.3bn Mega Millions jackpot in January, which still brought an extra $5m-$10m EBITDA benefit, Truist noted.
Blame the Fed: PlayAGS has received minimal credit for repositioning its business, according to the Roth MKM team, who suggested that consistent market share gains and EBITDA beats since the second half of 2021 were “overshadowed by rising interest costs”.
Annualized interest expense increased by $22.5m over the past 12 months but PlayAGS hopes to reduce leverage from 3.9x to 3.2x by year-end..
Bally’s Corporation delivered a “nice” Q1 and was “finding what works” and “what needs to change” as part of its ongoing restructure, said JMP. The group announced the departure of CFO Bobby Lavan, is trying to sell DFS brand Monkey Knife Fight and outsourced OSB to Kambi, which JMP said was “a smart move”.
The group’s 4% iCasino market share in New Jersey is “impressive” and “could foreshadow positive results in newer or future iGaming markets”.
For Wells Fargo, Bally’s could reach higher-than-forecast USSB/iGaming market share but also needs the required bandwidth to integrate multiple platforms and casino assets simultaneously.
Wynn Resorts: The team at CBRE noted that the mood music from Macau “keeps getting better” with mass table drop at 82% of 2019 levels. They added that at the current recovery trajectory, Wynn could be run-rating at 2019 EBITDA levels in Macau as early as Q4 this year.
“The conversation is quickly evolving from a recovery to 2019 story to an exceeding 2019 story,” the team added.
Genius Sports: B Riley analysts noted how the $5m beat on revenue forecasts in Q1 effectively flowed through almost directly to the bottom line, which came in at $8m versus the $3m forecast. It demonstrates “ significant operating leverage,” the team added.
The growth drivers are “mostly structural” and include higher betting volume, more parlay options and an increased mix of in-play betting, both of the latter theoretically increase hold.
Sector watch briefing
Sports streaming
Suns block: An attempt by the Phoenix Suns to provide a free-to-air streaming service and dump its existing broadcast arrangement with the Chapter 11-stricken Diamond Sports Group was blocked by the bankruptcy courts.
The Suns and WNBA team Phoenix Mercury said last month they would not renew with DSG’s Bally Sports.
New Suns/Mercury owner Mat Ishbia said the move was an attempt to broaden the fan base. The streaming move would increase the number of households with access to 2.8m.
Earnings in brief
Mohegan Gaming’s net revenues rose 13% to $406m and adj. EBITDA increased 18% to $102m in Q2. Mohegan Digital revenues rose 284% to $27m as the group launched in Ontario to complement its existing online operations in Connecticut. Land-based gaming generated $285m of total revenues.
Zeal Network: Revenues rose 6% to €27m while EBITDA was up marginally to €9m. During the period, Zeal was granted permission to offer slots by the German authorities. It confirmed revenue forecasts of €110m-€120m for 2023 and EBITDA of €30m-€35m.
Ainsworth Game Technology said it expects to announce H1 pre-tax profits of A$20m excluding currency impacts and one-off items at the end of June. In a trading update, the group said it was seeing continued growth in North American historical horseracing wagering, while Latin America revenues are “expected to increase by at least 25%” on the $33m recorded in H222.
Both Genting Singapore’s adj. EBITDA and revenue were up 54% to $192m and $484m in Q1. The group said Resorts World Sentosa was benefiting from the travel and gaming recovery in the region and from its partnership with the Super Golf League/LIV Golf events.
Pollard Banknote: Revenues were up 9% to C$125m but EBITDA was down C$1m to C$18m as cost of sales rose 17% to C$107m and “significant cost increases” with the group’s instant ticketing system impacted margins.
Startup focus – Pro League Network
Crazy golf: New York and Boston-based Pro League Network was formed only last year by sector veterans Mike Salvaris and Bill Yucatonis and aims to be the “leading source of fun and inherently bettable live sports” via, first, content such professional mini-golf and (checks notes) professional pillow fighting. Yes, pillow fighting. Professional pillow fighting.
Funding backgrounder: Currently self-funded, the company is closing on its seed round.
The pitch: The company points out it is providing a “completely new business model” for sports. “PLN is betting that the future of sports lies in sports that are short form, studio-produced, always available and often creator-driven,” it adds.
The team has quickly developed its portfolio of sporting properties and is adding two to three new sports every week.
PLN thinks that providing wagering opportunities during the quieter period of the wagering calendar will prove a key driver of growth.
It recently launched out of stealth mode in early December with five sports in its portfolio – Car Jitsu, SlapFIGHT Championship, US Pro Mini Golf, World Strongman and Major League Paintball’s NXL ProSeries.
Yes, that slap fighting.
Broadcast news: By the end of the year, that will ramp to two to three hours of content per day to sportsbooks. “All legal, betable sports with the highest integrity and optimized for the wagering calendar,” the team says.
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Career paths
Kindred Group has announced that CFO Johan Wilsby will leave his position this autumn. The group has initiated the process to find his replacement.
UK casino group Rank has promoted head of interactive Jon Martin to the role of group COO.
Greek operator OPAP has appointed Achillia Condou as its new chief people officer and member of its management team. She joins OPAP from FMCG conglomerate Unilever.
Colombia’s gambling regulator Coljuegos has appointed Sammy Libos Zúñiga as its new president with immediate effect. Zúñiga was previously deputy director of fiscal policy at the Ministry of Finance and Public Credit.
Alex Norling has been promoted to global head of creative at esports-focused bookmaker Rivalry, which he joined in February 2021.
Newslines
From today, Genting Hong Kong has delisted from the Hong Kong Stock Exchange.
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