• The number of strategic reviews within the sector points to a future that is in flux.

• In +More: a summary of a busy month for deals.

• The quarterly deals roundup is headed by IGT’s merger with Everi.

And now that we're through, I just don't know what to do.

Strategic review overload

The world is full of married men: While not exactly buried, the announcement that BlueBet was merging with rival Australian challenger brand Betr contained within it the news of another strategic review, this time with regard to the company’s somewhat underpowered US brand ClutchBet.

• Saying that the Australian business would be the combined entity’s prime focus, the company said on page 6 of the merger announcement that the US business would be looked at post-completion.

Flux: BlueBet is the latest to tell the market that it is thinking through its alternatives for all or part of the business. A non-exhaustive list of companies that are either still undergoing review or have recently completed one includes:

• Entain, where implicitly – if not perhaps explicitly – it has hired Moelis to oversee the potential sales of some, all or none of its recent bolt-on acquisitions.

• 888 put its US B2C operations under review – and quickly found a buyer in Hard Rock Digital.

• Kindred, now subject to a bid from FDJ, similarly placed its US operations in the spotlight and subsequently shuttered what was always a business with a vanishingly small footprint.

• In the affiliate space, Catena Media underwent a review ahead of selling almost all of its European and global-facing sites.

• Bragg Gaming has formed a special committee to look at the potential for a sale of the entire business.

• Rush Street Interactive was reported to have undertaken a review, yet to be confirmed by the company, and has sounded out buyers including DraftKings.

• The operator behind Betway, Super Group, announced it was reviewing the future of its US operations.

• In the supplier space, IGT talked its options through with its advisors before opting to merge its gaming and digital gaming supply units with Everi and splitting off the lottery supply side.

• Lastly, Codere Online has brought in the advisors to help with the LatAm-facing company’s long-term growth plans.

Mirror, signal, maneuver: “A strategic review is a mechanism to communicate to investors to say, ‘we are not just standing by and are considering our options’,” says Chris Lynch, gaming and leisure investment banking lead at Citizens.

• It is also a way of signaling that a business is up for sale. “A strategic review is traditionally a way of saying a company is up for sale without having to actually say that,” says Paul Richardson, partner at the Partis consultancy.

• “When you initiate a strategic review, it is often perceived as putting a ‘for sale’ sign in your front yard,” adds Lynch.

• “Almost every strategic review considers a sale of all or part of a business. One way to respond to unsolicited interest is by seeking out explicit interest from additional parties.”

• “It says a company is very serious about considering a buyout, and these things are open-ended.”

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What are we going to do now?

The healing process: Paul Richardson at Partis points out that, against the current backdrop of the developments within the sector, it is clear some management teams are “genuinely reviewing their options” with particular regard to “what they should do” in the US. Or, as Davis Catlin, principal at Discerning Capital, says, this is in part about “post-bubble healing.”

• “This industry was filled with all sorts of poor decisions in the 2020-21 period, where companies entered into all sorts of decisions to drive their stock prices higher without any thought of the ability to generate real returns,” he adds. 

• “I don't think it's just in the US as the acquisitions and partnerships were fairly global in nature, but I do think it mostly occurs in the US.”

It doesn’t cost anything to be polite: By Catlin’s reckoning, announcing a review to ‘course correct’ on previous strategic wrong turns is also a way for management teams or boards to avoid carrying the can for the original error.

• “I think it's partially about not getting fired as the management team or board members,” he says.

• “It is a nice way to say 'we are correcting our past mistakes' without having a public activist step forward and embarrass the team.” 

Situation on the ground: What has changed from when some of these original decisions were made is that the US market has quickly matured and not necessarily in the way that companies either hoped or expected. In short, it is far more concentrated than many had forecast and features far less iCasino opportunities.

• “The top-heavy nature of the market is largely a function of the failure of more iCasino licensing,” says Chris Lynch from Citizens. “If we have 30 states with iCasino, it would likely be very different.”

• “If you are in a bull market, there is less pressure to initiate a strategic review,” he adds. 

• “I'm not sure the market fundamentals have changed all that much in the last two years, but I do think the market perception has.”

I think I know the answer: As with a question from the prosecuting attorney in the courtroom, the suspicion with many strategic reviews is that the company knows what conclusion will be reached before the advisors have even started asking the questions. “I think the board members are smart enough to know the most likely outcomes when they announce the review,” says Catlin.

• “In my opinion, they are often just paying a banker to come in and support their own views with independent analysis,” he adds. 

• “I cannot recall a situation where the strategic review didn’t follow the initially rumored path in recent years.”

What if you host a party and nobody shows up: It could be worse, he argues, suggesting that any company heading into a review process without a clear idea of where the road heads out could be asking for trouble. “There are some companies that have announced strategic reviews and have yet to announce a conclusion – those are actually the scariest positions in my opinion.”

• “If you ring the strategic review dinner bell and no one comes to buy your assets or take you private in the first 18 months, then I think that speaks to the lack of viability of the businesses,” Catlin adds.

• “There are willing buyers of assets that have value, so no progress is a scary signal.”

+More Deals

The bid from Standard General to snap up the remaining three-quarters of Bally’s that it doesn’t already own faces an uphill battle, according to sources who spoke to E+M. Separately, a recent note from the credit team at CBRE put the likelihood of a deal going through at less than 50%. 

As noted above, BlueBet announced an all-share merger with the Matthew Tripp-helmed Australian Betr (not to be confused with the US Betr led by Joey Levy) alongside a A$20m ($13m) equity raise, which it said will fund growth initiatives.

The family of former STS founder and now chair Mateusz Juroszek now controls 15% of GiG. He has expressed his intention to double that holding in the coming months as he pledged to help the affiliate side of GiG – which is due to split from the sportsbook and iCasino backend supply arm soon – to fund an M&A spree both in the US and elsewhere around the globe. Recall, the Juroszeks sold STS to Entain for £750m last summer.

Churchill Downs has closed on the sale of 49% of its United Tote Company subsidiary to NYRA Content Management Solutions. The deal was originally agreed in August 2022 and had been expected to close by the end of that year.

Gambling.com announced the completion of the $37.5m acquisition of Freebets.com and associated assets from XLMedia. Charles Gillespie, CEO, said of the deal for the UK-facing sites that “while expansion of gambling in the US grabs all the headlines these days, many of the industry’s most attractive markets remain in Europe.”

OpenBet and IMG Arena’s brief life within the public spotlight is coming to a premature end after parent company Endeavor announced its majority shareholder Silver Lake would be acquiring the shares it doesn’t already own, valuing the sports and entertainment business at $13bn.

Penta Investments is weighing up a potential sale of the central European-focused betting and gaming group Fortuna Entertainment and has hired Morgan Stanley to advise. According to Reuters, a sale could fetch €2bn via an auction process, which will run until the early summer.

Golden Matrix shareholders approved the proposed acquisition of Meridianbet for $300m.

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Quarterly deals review

Everyone’s a winner: The biggest deal announced in the first quarter was the merger between IGT’s gaming and digital gaming and betting business and gaming to fintech provider Everi. The new combination will have an enterprise value of $6.2bn.

Ooh la la: Next up was FDJ’s $2.8bn bid for Kindred. Activist investors in the Stockholm-listed operator behind the Unibet brand, notably Corvex, were long rumored to have been pushing for a sale of the business and finally found a willing buyer in the ex-French state monopoly operator.

Hit the jack(pocket): The other big deal from Q1 was DraftKings move into the adjacent area of secondary lottery with its $750m buyout of Jackpocket.

Calendar

• Apr 17: Entain

• Apr 18: Rank

• Apr 24: Evolution, Kambi

• Apr 26: Betsson

• May 1: MGM Resorts

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