Good morning. We start today with the news from overnight that Scientific Games has sold the OpenBet sports-betting backend business to Endeavor for a total of $1.2bn in stock and shares. Endeavor, which already owns the IMG Arena data and streaming business, will now own an “end-to-end” sports-betting solution. We also have reaction to MGM’s Cosmopolitan buyout (including some further analyst thoughts on the DraftKings/Entain/BetMGM drama) as well as an analyst update on Better Collective.

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Scientific Games sells OpenBet to Endeavor

The top line

• Endeavor will pay $1.2bn for the OpenBet sports-betting backend supply business.

• The deal consists of $1bn in cash and $200m in Endeavor stock

• The price represents c.10x FY21 revenues and an estimated 34x assumed FY21 EBITDA of ~$35m.

• U.S.-listed sports and entertainment group Endeavor owns data and streaming business IMG Arena as well UFC.

• The deal expected to close in second quarter 2022.

Ari up: The Ari Emanuel-led Endeavor is perhaps the surprise winner in the race for the OpenBet business, despite its existing footprint in sports-betting via the IMG Arena data offering. While the OpenBet technology is widely reckoned to be ‘creaking’ it does comes with an impressive list of clients attached including Entain (Ladbrokes, Coral, BetMGM), Flutter (FanDuel, Sky Bet, Paddy Power), DraftKings, William Hill and many more.

Chain and able: More than just technology, OpenBet also includes the recently bought Sportscast business which produces BetBuilder products as well as the Don Best sports data business. Endeavor said in combination with the IMG Arena business it would create a “unique end-to-end solution” from data and streaming through to mobile-betting technology. Emanuel said the combination of OpenBet and IMG Arena would “enable us to expand our footprint across the entire sports-betting value chain.”

History lessons: Looking at the corporate paper trail for OpenBet, the analysts at Regulus point out the company was bought by PE house Vitruvian in 2011 for £208m before being sold to NYX in 2016 for £270m and then NYX itself being bought by Scientific Games for £490m in 2018. Suggesting there are few cost synergies to be had, Regulus says Endeavor is placing a “very big bet on US-facing content and platform integration.”

“In the short-term, OpenBet’s clients are likely to be relieved the business has been bought by a group that does not create any immediate conflicts,” the Regulus team added. “However, if Endeavor’s plan is to use the platform to drive more and higher value sports content sales then a conflict might emerge.”

The Weight: The deal marks another step in Scientific Games transformation into a gaming-only supplier across land-based and digital with the $1m in cash proceeds going towards the paying off some of the ~$9bn in debt. Last week, the company also released further details of its lottery business which it is also hoping to offload. A recent report suggests a float in Australia is now the favored option with the company targeting a $5bn listing.

Further reading

Entering the arena: The LA Times on Endeavor’s rocky road to a listing.

MGM buys the Cosmopolitan

The top line

• MGM will pay $1.625bn to acquire the Cosmopolitan operations from Blackstone.

• The property generated an est. Q221 property EBITDAR of $368m and the deal represents a multiple of c. 8x adjusted EBITDA.

• In parallel, MGM has entered into a 30-year lease agreement with Stonepeak Partners, the Cherng Family Trust and Blackstone Real Estate Income Trust, Inc.

Make mine a double: MGM was always the most obvious buyer for a property which sits between the MGM-operated CityCenter complex and the Bellagio on the Las Vegas Strip. “MGM was likely one of the few companies that could extract meaningful synergies that also had the capital to make the acquisition,” said the team at Wells Fargo. Blackstone bought the property from previous owner Deutsche Bank (don’t ask) for $1.7bn. The total sale price to MGM and the property consortium is $5.7bn.

Millennial chasing: The team at Macquarie pointed out the buyout was in line with comments from new-ish MGM CFO Jonathan Halkyard about the company exploiting more opportunities on the Strip. 

“We believe there is a good opportunity to cross-sell the high-end business at Cosmo with other MGM LV properties, as well as with its Macau assets,” said the Macquarie team. “Additionally, Cosmo carries a younger customer base, which will bode well with MGM’s omni-channel approach of cross-selling database members into its online betting platform.”

Will there be anything else Sir? The Cosmopolitan news hasn’t dented analyst expectations that MGM will be involved in some form of transaction around Entain and BetMGM. The team at Jefferies said MGM “likes its positioning and believes it largely controls the outcome,” which could include either the acquisition of the Entain half of BetMGM or a bid for Entain in its entirety.

“We are not certain that there is a pricing mechanism in the buy/sell provision of the BetMGM JV, but MGM’s comfort suggests to us that there is one,” they added. “It is not clear how the technology would/could work, but we presume MGM would make alternative long term plans if it does not buy ENT in total.”

Paper planes: Jefferies also note there may be qualms among Entain investors over accepting so much DraftKings paper (c. a 4/5ths of the $22.4bn total) and suggests the company itself sees MGM as “the more natural buyer”. Wells Fargo analysts, meanwhile, suggest the “unlikely scenario” of an MGM re-bid might involve MGM matching DraftKings on the total offer but with a higher cash component, saying that was “not impossible.” For its part, Jefferies believes DraftKings has “an appetite” for bett er tech despite the recent swtioch to it sown SBTech-based platform and “is not interested in owning the BetMGM stake.”

Meanwhile on social…

Chris Grove @OPReport

Industry chatter is increasingly bullish on the chances of DraftKings scooping up Entain. If it happens, @JasonDRobins will complete a breathtaking transition from thorn in the side of US casinos to arguably the single most powerful person in regulated online gambling.

September 26th 2021

4 Retweets20 Likes

Better Collective analyst update

Action reaction: The team at Redeye has increased its FY21 revenue and EBITDA estimates based on the enhanced positioning of Better Collective in the U.S. via the Action Network acquisition which it expects to contribute c. €20m to est. FY21 revenues of €180m. However, the projected EBITDA of €55m suggests the Action network will have “a slightly negative impact on profitability.” “The lower profitability relates to the focus on growth which is fully rational considering the growth potential in the US market over the coming years,” the Redeye team added. “Furthermore, the business model for Action has the same scalability as Better Collective suggesting profitability should also improve over time as revenue grows.”

Newlines

Just capital: Caesars Sportsbook will be the first-ever U.S, major league sports-betting jersey patch sponsor after agreeing a dela with the NHL’s Washington Capitals for the 2022-23 season. This won’t be the last we hear of this type of deal.

What we’re reading

Lottery winners: Sazka has spent £9m in its bid to operate the UK National lottery, according to the Telegraph.

Water works: Colorado has collected nearly five times more money for water projects than anticipated from gaming taxes, officials have said.

Calendar

• 28 Sep: Gaming in Holland, Amsterdam

• 28 Sep - 1 Oct: iGB Live in Amsterdam

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com