Good morning. On the Weekender agenda:

• Caliente and Playtech are heading for a Caliplay divorce.

• MGM estimates losses caused by cyberattack at $100m.

• Gaming CEOs expect a tougher environment in the next six months.

• Kambi gets a Svenska Spel boost in the shares week.

• BettingJobs’ Jobsboard features head of casino and managing director roles.

But the words we’re hiding from him now tear the heart right out of me.

Caliplay legal action

Legal proceedings have been initiated by Playtech’s Mexican JV partner.

D.I.V.O.R.C.E: The future of Playtech’s involvement in the Caliplay joint venture with Mexican gaming giant Caliente has been thrown into further doubt after Caliente Interactive said yesterday, via a press release, that on August 28 a civil court in Mexico City had accepted jurisdiction with regard to legal proceedings brought before it by Caliente.

• Caliplay is seeking the annulment of the relationship between the two companies.

• The delayed nature of the press release was to “ensure that its customers and business partners are made aware of the position”.

• Playtech said it only became aware of the court’s decision to accept jurisdiction yesterday.

• It added that it “had not yet had access to the court filings in Mexico and, to the best of its knowledge, had not yet been served with any proceedings”.

• Sources close to Playtech suggested the timing was “weird” and seemed designed to “apply pressure” ahead of G2E.

Are you being served? In accepting jurisdiction over the case, the Mexican court has issued a number of interim orders including the suspension of “key rights” held by Playtech such as any further payouts due to it. Playtech has also been ordered not to pull the rug from under the Caliplay business and continue with its provision of software and services.

• Recall, Playtech was careful in early September with its words about the Caliente partnership, where it owns a 49% share.

• CEO Mor Weizer told analysts on the earnings call that it was a “matter for the court”.

• The Caliente strategic partnership was extolled by Weizer and with good reason given the extent of the contribution from the Mexican business to Playtech’s B2B business.

• In 2022 Mexico contributed €124m to Playtech’s total B2B revenues of €632m.

Hammer time: Sources have speculated that one possible outcome from the legal dispute is Playtech might be bought out. Caliplay said yesterday it is “keen for this matter to be resolved quickly”, adding that it is “committed to maintaining a channel of communication with Playtech through which any disputes can be discussed and resolved”.

• For its part, Playtech reiterated that Caliplay is a “highly valued customer” and the partnership between the two had been “extremely productive for both parties”.

Deal talk instants: Pointing to the importance of the Caliente strategic partnership to Playtech’s bottom line, sources suggested “this might not be the end” and the legal action – and in particular the way Caliente has broadcast the news – feels like an effort to “bring them to the table”. 

• “Caliente may just want to rewire the relationship, so they have more flexibility,” one source argued.

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MGM hack losses

MGM Resorts estimates the likely losses caused by the recent hack at $100m.

Impact zone: The casino giant said the losses would likely be covered by its insurance and that there will be “minimal” impact on Q4. The estimate on the Q3 EBITDA impact came with the release of further details on what information the cyberattackers managed to obtain about customers. 

• MGM said yesterday the hackers obtained customer information dating back prior to 2019.

• Recall, just this week BetMGM appeared to be the subject of a ‘credential stuffing fraud’, likely involving stolen customer information. 

• Separately, BetMGM said the issue had been resolved and wasn’t related to the MGM hack.

An honest appraisal: Wells Fargo analysts said they “aren't sure if the $100m Q3 EBITDA drag is better or worse than expected (and not sure it matters if it’s covered by insurance)”.

• But we do think this removes an overhang on MGM,” the team added. 

• CBRE agreed, saying the announcement should “de-risk the potential for a Q3 headline earnings miss” and removes the fear of longer-lasting impact.

ICYMI

In Sharpr this week, Cody Luongo looks into the news that Czech Republic-based esports data supplier Oddin has received a temporary license in Colorado, the company’s third territory in North America.

• Cody notes other recent developments in Colorado, including SIS’s extended deal with Betsafe, which see esports products added to the roster and the supply license gained by Bayes last year.

In Compliance+More this week, the ongoing polarizing debate over skill gaming machines in states such as Pennsylvania, Virginia and Missouri is examined. As the article says, the industry loathes them while the state authorities are busy trying to ensure they are regulated.

• Also in C+M this week, Betway owner Super Group announced it was exiting the Indian market, saying the new effective tax rate of 28% of turnover made its operations in the country unsustainable.

Dustin Gouker in The Closing Line looks at BettorFantasy’s deal to buy FantasySpin: “The acquisition indicates we’re likely moving into a new era of envelope-pushing.”

Sector slowdown

The post-pandemic pace of growth was fun while it lasted.

The brakes: The US gaming sector is seeing a deceleration from the blistering rate of growth seen since the pandemic, according to CEO expectations. In a survey compiled for the American Gaming Association by Fitch Rating, respondents said they remained optimistic despite expectations of a “mild recession” in Q4.

• Wider concerns about the economy were top of mind with the survey participants. 

• Just over a quarter of gaming CEOs said access to credit is “tight”, while 58% cited the interest rate environment and inflation rates as the “top factor limiting operations”.

• There were positive views about balance sheets, with a net positive of 26% saying they expected theirs to improve.

• But a net negative of 13% believed the pace of revenue growth to slow, swinging from a positive outlook this time last year.

Weekend warriors: The CEOs showed a small net negative of 5.6% on overall consumer activity in the next three to six months. However, there was a distinct split between expectations for weekend activity – which is expected to be flat in the next six months – versus weekday activity where there is a net negative of 22%.

• Given that, unsurprisingly a net negative of 17% expect a drop in promotional activity.

Green shoots: The upside from the survey comes from the attitudes of the CEOs to capital investment, with a 44% net positive of gaming suppliers expecting to see an increased pace in the six months ahead. 

• Overall, a net positive of 22% suggested capital investment will increase in the next three to six months.

Analyst takes

Sportradar: Having prepaid all of its €420 senior secured loan at the end of December last year and with its entire €220m revolving credit facility left undrawn as of the end of Q223, the debt analysts at Fitch noted that Sportradar’s gross leverage was “close to zero”.

• Moreover, the team said they don’t expect Sportradar to draw down on its available debt facilities to fund M&A in 2023, “which should lead to significant leverage headroom”. 

Flutter: The recent acquisition of MaxBet has caused the team at Peel Hunt to “consider the benefits of geographic diversification for gambling operators”. In theory, the analysts suggested, it should spread risks and be good for valuations if, as per Serbia, the diversification “appears to be into high-growth markets”.

• However, the team added that it wonders whether there is a downside; namely that the complexity of each geographic market might discourage investors.

• “Investing requires confidence,” they said. Geographic diversification reduces the reliance on one single country “but if investors cannot understand the risks in multiple countries, the benefit may be undermined in terms of valuation”.

The shares week

Speak and Spel: Kambi’s investors were pleased enough with the supplier’s new sportsbook provision deal with former Swedish monopoly operator Svenska Spel, which will see Kambi provide both OSB and retail solutions.

• Kambi said the deal would have a “meaningful financial impact” from H224 onwards.

• In a recent note on Kambi, Jefferies analysts noted that the loss of Penn Entertainment in the US was somewhat tempered by BetMGM’s launch in the UK where Kambi provides the sportsbook backend via its existing deal with LeoVegas.

• The team added this could drive performance in Q423.

🔊 Kambi has something to shout about

What we’re reading

Sell-off: “Some strategists are pointing to fears of weakening consumer spending and an economic downturn as the Federal Reserve keeps interest rates higher for longer.” Bloomberg. 

‘The consumer is exhausted’: Raphael Thuin, head of capital markets strategies at Tikehau Capital, quoted in John Authers’ Points of Return.

• “People are estimating the economy will rebound and that we won’t have a recession. That’s too optimistic. You don’t need a crystal ball.”

Rebalancing: Barclays analyst says the only way to revive the bond market would be an equities sell-off.

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Datalines – Ohio

The chasing pack: Fanatics can be seen to be having an impact in the Ohio market, grabbing 4% of share in August with a GGR take of $1.4m, more than double the previous month. It leaves it chasing Caesars, also on 4%, and bet365, which grabbed 5% of the market or $2.2m of GGR.

• The top three still controlled 77% of the market, while 12 brands managed <3% between them, including Betr, Tipico and Betfred.

M&A notebook

Star billing: Star Entertainment Group is once again attempting to sell its Treasury Casino & Hotel in Brisbane, with the price tag set at above A$200m ($127m), according to the Australian Financial Review.

• The paper noted Star was close to a sale-and-partial-leaseback deal for the Treasury in June, but the move fell through.

• The property is set to be closed when Star opens the nearby A$3.6bn Queen’s Wharf Brisbane next April.

• In June, the company sold its Sheraton Grand Mirage Resort, Gold Coast for A$192m. 

• Star reported a net loss of A$2.4bn for the year ending June 30.

The race: PA Betting Services – owned by PA Media Group, whose flagship brand is the UK and Ireland’s national news agency – has acquired Singapore-based horseracing data company iRACE Media. 

Newslines

Light & Wonder’s live deal operation Authentic Gaming has gone live in Michigan.

Golden Matrix has announced further amendments to its forthcoming acquisition of MeridianBet including a “modification” of the final closing terms that will now involve the use of $20m of Meridian’s cash in hand to be used as part of the $30m closing transaction fee.

• The deal is now expected to close in Q4 or early next year.

99 problems and a listing ain’t one: 99% of Sportech shareholders have approved the plan to delist from the London Stock Exchange and go private.

Paddy Power has shuttered 21 retail premises in Ireland, citing expiring leases and early terminations as the reason.

Lottery.com: The troubled ex-SPAC has opted to exit the gambling space via an acquisition of wellness company Nook. The company was listed in 2021 but soon ran into trouble after a $30m misstatement of revenues in July last year that saw founder and CEO Tony DiMatteo step down.

Lottery operator Allwyn has rebranded Camelot Illinois as Allwyn North America, a move it says brings the business in line with its operations in the region.

Raketech has extended its revolving credit facility with Avida Finans until December 2024.

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