• Playtech and Flutter in talks over potential €2bn deal.

• In +More: DraftKings’ week gets worse.

• Evoke talks reset after confirming a poor first half.

• Flutter takes the analysts’ plaudits after its Q2 earnings.

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Podium hunting

When the moon hits your eye: Playtech saw its share price soar by over 22% at one point on Wednesday before settling for a near-14% rise after it admitted it was in exclusive talks with Flutter about a potential deal to sell its Italian B2C business Snai.

• Flutter saw its UK shares rise in sympathy, up as much as 13% in early trading, while the US price was up 10% on open.

That’s amore: The Playtech stock exchange statement came after a report from Sky News suggested the pair were in talks about a deal that would value Snai at ~£2bn or €2.3bn. Flutter also released a statement confirming the discussions. 

• Neither company claimed there was any certainty a deal would ultimately be agreed.

• When asked about potential M&A on Flutter’s earnings call this week, CEO Peter Jackson said the company was “happy to make acquisitions in this market if we think it will help us.” 

Numero uno: Analysts at Investec suggested the multiple would be ~8.5x, which was “high” for an Italian business but “consistent with the strategic logic” of seeking the #1 position in Italy.

• In FY23, Snai generated revenues of €947m and adj. EBITDA of €256m.

On the Q2 earnings call on Tuesday, CEO Peter Jackson noted the success Flutter has enjoyed with Sisal since it acquired the business for €1.91bn in December 2021, pointing to revenue growth of 37% since the buyout was completed in August 2022.

• He said the introduction of same-game parlays to the Italian market for the recent Euros tournament had helped to deliver record market share for Sisal.

• According to Q1 data from the Italian authorities, Snai is in third place in Italy with 9% market share, behind Lottomatica’s brands, which – once its recent SKS acquisition is incorporated – will have 29% share.

• Flutter’s existing cohort of brands is next with 21%, meaning any deal would nudge its share beyond Lottomatica.

• An unknown is exactly how the Italian competition authorities would view the move.

🥇🥈🥉 Italian online market shares in Q1

It’s complicated: Playtech has been the subject of longstanding M&A interest including a £2.7bn takeover bid from Aristocrat, which was rejected by Playtech’s shareholders. A bid from TTB Partners, which included Playtech CEO Mor Weizer, likewise eventually foundered in late 2022.

• Moves have also been stifled by the ongoing legal tussle with Caliente surrounding its supply deal with Caliplay in Mexico.

• Investec said selling Snai would leave Playtech as a “formidably cash rich” pure B2B provider. 

• It is worth noting the rumored price tag is more than Playtech’s entire market cap of ~£1.9bn.

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+More

You’ve got mail: DraftKings’ week went from bad to worse after the company erroneously sent out an email about dead-heat golf bets to its entire subscriber base. The subsequent traffic spike caused DraftKings’ site to go down during the day on Wednesday.

• The day before, the company announced it would not be imposing a player surcharge in high-tax states after all.

UK-based affiliate provider QiH has made its debut in the sports-betting market with a site called Podium Bets, which will initially cover horseracing, football, boxing and the NFL.

Southern Star: The UK bookmaker Star Sports has received a license to operate in Victoria, Australia.

Evoke earnings

Remodel: CEO Per Widerström said Evoke was “undertaking a total reset of the business” after the company suffered the predicted punishing 67% fall in EBITDA in H1 to £43.8m, which he said was “not where the business wanted to be.”

• Revenue for the half came in at £862m, down 2%.

• Recall, Evoke had warned in mid-July on its H1 numbers after admitting a marketing blitz at the start of the year had failed to ignite the business.

• The company said today marketing had increased 12% over the period.

• Adjusted for the costs of the exit from the US, EBITDA was down 26% to £116m.

Ad break: Widerström was keen to promote the early Q3 figures, which the company said was in line with previous guidance of growth between 5% and 9%. It added the percentage of revenue spent on marketing would fall to ~18% vs. the 25% in H1.

Best in show

The power and the glory: Analysts were cooing over Flutter’s debut earnings since it completed its US primary listing in May, with the company comfortably taking the prize and the plaudits for its Q2 performance.

• The team at JMP noted the “impressive” US performance, despite the slight slippage of US iCasino share in Q2.

• Total US sequential growth came in at 8%, which the team said was the “best growth rate in all US gaming.”

• Revenues were also 7% ahead of consensus while the adj. EBITDA beat was 37%.

Against the tide: For CBRE the raised guidance for the year was all the more impressive given the headwinds, including the negative impact from higher taxes in Illinois (~$40m), new customer spending (~$20m) and higher payment processing fees (another ~$20m).

• As noted on the analyst call, FanDuel expects to mitigate half the estimated $100m EBITDA impact from Illinois taxes in 2025, largely through reductions in player generosities and marketing. 

• Additional upside could come if FanDuel captures share from subscale operators.

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London weighting

Top ranking: A return of London casino traffic and the potential for the new UK government to get around to the already announced land-based gaming reforms leaves casino-to-bingo operator Rank on a sounder financial and strategic footing, according to CEO John O’Reilly.

• By the numbers: Revenue for the financial year to June rose 9% to £734m while underlying operating profit soared by 131% to £46.5m.

• Revenues for the venues business was up 8% to £508m while the digital arm rose 12% to £226m.

• London casino revenues were up 10% vs. 8% for the rest of the UK.

Earnings in brief

Golden Matrix: Post the reverse takeover by Meridianbet, the company achieved a 75% increase in Q2 revenue to $39.4m while adj. EBITDA was flat at $5m. CEO Brian Goodman said the integration of Meridianbet had been “seamless.”

The Ontario-focused NorthStar Gaming saw revenue rise 61% in Q2 YoY to C$7.5m ($5.5m) while net losses came in flat at C$4.7m. The company said it outpaced market growth in Ontario with total wagers up 42% vs. the market’s 32%, while GGR rose 58% vs. 34% for the sector as a whole.

Swept away

And even if I could, it’d all be gray: Catena Media’s new CEO Manuel Stan and his all-new management team have a mammoth task ahead of them, trying to turn around what was once a market leader in betting and gaming affiliation.

• But one area clearly identified as displaying growth potential is sweepstakes. 

• While total revenues fell 11%, the casino segment saw revenues rise 3% YoY driven by sweepstakes affiliation, which accounted for a third of revenues.

I’m always touched by your presence, dear: The sweepstakes focus comes at a moment when Catena is hoping to diversify its portfolio away from a reliance on new state-by-state launches. 

• In practice, Stan suggested, it means building up a brand presence in social casino and sweepstakes alongside an effort to engage with Spanish-speaking audiences in the US and the upcoming launch into sub-affiliation with Mrktplays.

• But it is sweepstakes that Stan said was the “fastest-growing vertical.” 

• While capitalizing on that, Catena is also taking the long view on building brands that can position the company post-regulation.

Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.

Calendar

• Aug 15: Gambling.com

• Aug 21: Better Collective (earnings)

• Aug 22: Better Collective (call)

• Sep 25: Flutter investor day

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