Sep 9: Weekend Edition #63
AGS nixes Inspired talks, FanDuel/Churchill Downs, LiveScore fundraise, Kambi M&A, sector watch - US TV sports +More
The news that LiveScore has secured a £50m strategic investment from Switzerland-based media conglomerate Ringier says a lot about investment in the online betting and gaming space. Two years ago, this would have been a SPAC; now, though, instead of public money it is private money that is coming in. Alongside the news that AGS and Inspired failed to agree on a price for a deal, it adds to the impression that money for corporate activity is tighter than previously.
AGS nixes Inspired talks
The gaming provider calls a halt to talks with Inspired over a rumored $370m bid.
Let’s call the whole thing off: In an SEC filing yesterday, AGS said discussions over the approach from Inspired Entertainment had been concluded without agreement on a transaction. Analysts said the two couldn’t agree on a price.
Relief: The team at B Riley suggested fears over Inspired balance sheet post any AGS deal would “now subside”.
For AGS, they added there will have been buying at current levels in expectations of a further bid above the rumored $10 a share price but that these ”arb buyers” will now drop away.
Back where we started: However, the team at Roth pointed out that regardless of these specific talks coming to an end a residual AGS premium should remain as the negotiations have revealed that AGS is up for offers. “We believe other potential buyers might be interested as well,” the analysts added.
Time will tell: For Inspired, Roth believes it will be involved in a transformational acquisition sooner rather than later.
Buying money: The AGS bid also “affirms interest in (Inspired) acquiring companies with strong free cash flow and short payback periods, rather than companies with rich valuations.”
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Breaking data: GeoComply said geolocation volumes for last night’s NFL kickoff game were up 77% YoY from 12.7m to 22.6m. Geolocation volumes in New York for its first full season of NFL came in at 3.7m.
OSB promotions analysis
Wells Fargo suggests promotional spend is yet to accelerate ahead of the start of the NFL.
Let’s get rational: After tracking promotional offers in the last few weeks, the team at Wells Fargo suggests “operators might be getting more rational” with promotions as of Aug 30 around 12% below the prior week.
Early days: The monitoring did not include tailored promotions, odds boosts or traditional media marketing/sponsorships.
Follow the leader: Wells Fargo said FanDuel had significantly stepped down promotions from its $1,000 risk-free bet offer to Bet $5, get $150 in free bets between Aug 16-23.
No change: Promotional offers from BetMGM, DraftKings and Caesars had not changed much over the past few weeks, added Wells Fargo.
Multi-year deal will enable FanDuel customers the opportunity to place pari-mutuel bets including the Kentucky Derby.
Day at the races: As of January, FanDuel will pay for tote betting services and technology from Churchill Downs Inc. to enable horse wagering on FanDuel’s US platforms. CDI will receive content fees when FanDuel accepts wagers on CDI-owned content.
Derby day: As part of the agreement, FanDuel will also be the non-exclusive sports wagering sponsor of the Kentucky Derby.
Broadcast news: Fanduel will also be able to broadcast certain CDI content on its own TV channel.
Welcoming the deal, the team at Jefferies said it comes “at little cost” to CDI, albeit with the slight potential for cannibalization of its own TwinSpires business.
Keeping up with the Joneses: Over at Wells Fargo, the team suggested the partnership could broaden the pool of potential pari-mutuel bettors and also “pave the way” for CDI to conclude further deals as additional OSB operators seek racing content to “remain competitive”.
Value add: They estimated the deal could add ~$10m-$20m to CDI EBITDA.
Betting and media firm secures £50m strategic investment from Ringier Group.
Ringier-ring-a-roses: The new money from privately owned Switzerland-based media conglomerate Ringier’s newly formed sports media group values LiveScore at $500m, which it said would go towards accelerating growth in central and Eastern Europe. LiveScore’s current markets include the UK, Ireland, the Netherlands and Nigeria.
Financial backgrounder: The last financial statement for LiveScore available via UK Companies House shows in the year to Mar21 revenues nearly doubled to £45.3m but EBITDA losses also rose 42% to £31.3m.
A little bit of history: LiveScore was spun out of Gamesys in 2019 and ex-Gamesys founder Noel Hayden remains the executive chairman and a substantial shareholder.
CEO Sam Sadi told E+M the investment from Ringier would help unlock territories where LiveScore “doesn’t have a significant audience”.
Sadi said LiveScore Bet was the company’s core offering while the media arm contributes ~20% of total revenues and “works like a super-efficient affiliate” for the betting side.
Platform change? Sadi suggested LiveScore might be open to switching providers from DraftKings/SBTech. “We own our own PAM; it’s custom built for the media business and betting business. We own all our front ends.”
“We are comfortable with our current provider but there is a case in the future where we might need to swap, maybe Kambi or OpenBet or wherever we might want to go.”
Who is Ringier? Ringier Sports Media Group (RSMG) announced a partnership in July with Sportradar aimed at the African market and built around a sports platform called Pulse. RSMG also owns Sportal Media Group and Digital Ventures OOD in Bulgaria, Gazeta Sporturilor in Romania and Sportal in Serbia.
Sadi said Ringier was “not your typical media company”. He added: “They are very active investors. They have dozens of investments and almost work like a capital allocator.”
The sportsbook supplier has splashed out €38.5m for front-end developer Shape Games.
Shape of things to come: Kambi has moved to enhance its backend offering with the addition of Shape in an all-cash deal, which could rise to €78.1m. The Copenhagen-based Shape builds customizable frontend technology and includes Danske Spil and Norsk Tipping among its client roster as well as current Kambi clients BetWarrior and JACK Entertainment.
That’s rich: In 2021 Shape generated revenues of €7.6m and an EBITDA of €2.8m with growth in 2022 expected to be 100%
Staying on: Shape was founded in 2018 by CEO Christian Risom, chief product officer Nicolas Linde, and chief technical officers Ole Gammelgaard and Philip Bruce. All four will continue with the company.
Tools: Kambi said that front-end capability was a “key tool” for brand differentiation and localization.
Fundraises in brief
Bragg Gaming: The content provider said it has raised $8.7m of new funding from New York-based fund manager Lind Global Fund. The cash comes in the form of a 24-month convertible and is secured against the company’s assets.
Betegy: Yolo Investments has invested an undisclosed amount into the data content provider.
Online analyst update
Ahead of NFL kick-off, JMP picked out key themes for US sports betting.
Last exit to Brooklyn: Assessing the leading players, the team at JMP suggest DraftKings, FanDuel, and BetMGM have proven the “scale of their acquisition funnels, balance sheets, and, most importantly, tech stacks'' means they can fend off any competition.
They predict that as the season progresses and given the capital requirements to compete, the smaller sports-betting players will exit the business.
“That said, we would keep an eye on the new niche products evolving across the industry (betr, Underdog Fantasy), and the impact they can have on market share,” they added.
E+M note: See the Startup Month from Tuesday for more on betr.
Offensive discipline: JMP predicts that promotions as a % of GGR will peak in September before fading throughout the rest of the season and will be below the levels seen last year as operators give up the chase on unprofitable customers.
👀Tumbling dice: The JMP team note that price/sales multiples for betting and gaming operators have fallen from ~10x to ~2x within the last 18 months.
Analysts in brief
Red Rock: Jefferies has initiated on Red Rock saying it provides a “compelling story” with valuable real estate dotted around a “booming area of Las Vegas”. The team posits that Red Rock should be able to grow EBITDA by 70% over the next decade with the balance sheet having been de-risked.
Golden Entertainment: Jefferies has also assumed coverage of Golden Entertainment saying it has a “straightforward thesis” of balance sheet strength and strong fundamentals. They expect Golden to pursue growth more aggressively or accelerate shareholder returns with the proceeds from the recent Rocky Gap sale.
Boyd Gaming: Meanwhile, after meeting with Boyd management, Truist says they believe the recent Rocky Gap sale at a price of 10x EBITDA highlights Boyd’s “dislocated valuation”. They add that the company has seen steady trends and minimal impact through the recent macro uncertainty.
Regional gaming updates
Regional traffic data for August suggests seasonal patterns are re-emerging.
Who knows what tomorrow may bring? Looking at recent regional gaming traffic data, Wells Fargo and Deutsche Bank suggest it points to a deceleration in August against tough comparatives from 2021. The team at Wells Fargo said data across 17 regional casinos suggested a MoM decline in visitation in August of 8.3%, which implies an overall regional GGR fall of 7.1%.
Minus: The team added that this was a “modest negative for regionals” and even though estimates have already come down to more reasonable levels post Q2 earnings.
Freedom rider: Deutsche Bank suggests the regional markets had seen a “return to normality” with seasonal trends reasserting themselves.
Sector watch - US TV sports
Guns for hire: Sinclair’s Diamond Sports Group was reported last month to have hired investment banks Lion Tree and Moelis, leading to speculation it is looking to offload its 21 regional sports networks.
As analysts at Lightshed pointed out, since Sinclair bought the RSNs from Disney in 2019 for $9.6bn, EBITDA has collapsed from $1.6bn in 2019 to between $183-$200m for 2022.
Last year renamed them Bally Sports after a deal with the gaming operator.
Lightshed pointed out the critical question for the team MLB, NBA and NHL owners is who should take up ownership of the RSNs and “how do they create a compelling streaming service individually or jointly to future-proof the business”.
Capital moves: Separately, Monumental Sports & Entertainment (MSE), the owner of the Washington Wizards and the Washington Capitals, has agreed to acquire the remaining 67% of the NBC Sports Washington RSN that it doesn’t own from NBCUniversal for an undisclosed sum.
Zach Leonsis, president of media and new enterprises at MSE, told Sportico that “more can be done with our local media rights than what’s done today”.
By owning 100% of the asset, MSE will focus on creating “a more cohesive experience” and “alternative feeds and enhanced viewing experiences, in terms of gaming integrations and the like,” said Leonsis.
Illinois: Land-based GGR for August rose 8.7% YoY to $117.3m while on a same-store basis it was up 4.4%.
Ohio: GGR in August was up 0.8% YoY to $196m. Market leader Penn Entertainment GGR was flat YoY at $66.5m.
Maryland: Casino GGR for August was up 0.5% YoY to $169.4m. Market leader Maryland Live’s GGR was down 4.5% to $56.8m.
Camelot has dropped its appeal against the Gambling Commission awarding the contract to operate the UK national lottery to Czech lottery group Allwyn. The decision came about because of the risk that £1bn for good causes could be lost and major commercial risks incurred if it delayed the handover of the £6.4bn contract
The AGA says a record 46.6m Americans intend to place a bet on the NFL this season, up 3% on the 2021-22 season. Of that total the AGA forecast that 23m will do so online, up 18% on 2021, while 10.6m will place a wager in-person, a 2% rise YoY.
GAN has gone live with Oaklawnsports.com, the online sports betting platform for the Arkansas-based Oaklawn Racing Casino Resort.
FuboTV has launched its mobile betting app in New Jersey, having completed the soft phase launch of its OSB offering.
Geolocation provider XPoint Tech has gone live with the DFS operator BettorFantasy and is now available in 21 states.
Sep 13: Allwyn, Q2, E+M Deal Talk
Sep 14: Kindred capital markets day
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