Good morning. The great catalyst that is the US sports-betting and gaming opportunity continues to drive global M&A and the latest headline-making deal comes with the buyout of Playtech by Aristocrat for an enterprise value of £2.7bn ($3.71bn). While Playtech’s footprint in the US remains ‘nascent’ - it has a toehold in New Jersey - the investor presentation said the deal provides Aristocrat with ”material scale” in the ~$70bn remote gaming market stateside. Also hoping to grab a share of this particular mammoth is GAN, which last Friday hosted an analyst presentation and this morning we have the reaction to that.

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Aristocrat buys Playtech

The top line

• The deal values Playtech at 680p a share which represents a 58.4% premium to the share price on Friday. The £2.1bn offer will also see Aristocrat take over Playtech’s ~£600m of debt.

• The valuation is 11.4x EBITDA for the 12 months to June.

• The deal has been unanimously accepted by the Playtech board and will depend on the sale of the Finalto financial division. It has acceptances from shareholders representing 20.7% of Playtech’s share base.

• Aristocrat will finance the all-cash acquisition with A$1.3bn of new equity, a $2.05bn term loan and $0.8bn of existing cash resources.

AUKUS: Aristocrat CEO Trevor Croker said the deal was a “technology and talent” buyout with the US being the clear focus.

“The technology is proven globally, and they have the content and customer solutions,“ said Croker. “This also involves a large total addressable market, including the large North American market which will keep growing between now and 2025.”

He added that the deal had been 12 months in gestation. “​​We looked at smaller scale solutions too, which would have been cheaper, but this is the leading technology and has a leading footprint through live casino and also has the ability to provide B2B and B2C, which makes it a compelling acquisition for us.”

Awks: According to the presentation, Playtech derives a significant, c16.3%, of its business from Asia and a further 17.7% from other unregulated markets; or A$262.8m of total revenues in 2020 from a total of A$773.1m. “Yes there are unregulated aspects to it but that’s the nature of this industry,” said Croker. 

Talking point: Asked whether there were some unregulated jurisdictions that were “outside of (Aristocrat’s) risk appetite”, Croker said the company would “do a full review of our risk appetite against each jurisdiction and make decisions following that in terms of which markets to exit.” It estimates it will lose ~A$78m-$125m via exiting the most risky territories. “We’re confident that it is accurate from the information we have,” Croker added.

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Weathered: While the US is very much the focus, Aristocrat also spoke about the potential for bringing its land-based content to new markets in Europe, in particular Italy via Snaitech. “This is an opportunity to provide Aristocrat content into the established Italian market,” said Croker. “We can work with the experienced Snaitech management team who have weathered the storm of COVID-19 and have established themselves in Italy for some time.”

GAN investor presentation

Hot rocks: While a nearly two-hour presentation covered much the same ground as previous earnings calls, the company did announce a new online casino and sports-betting agreement with Red Rock Resorts. The deal marks a first dip of the toe on the part of the operator of the Station Casinos and other Nevada locals properties. CEO Dermot Smurfit said the deal was GAN’s “first significant” online and retail sports-betting client. Red Rock is yet to comment.

Combi cooking: Analysts at Jefferies liked what they heard from the company, particularly the forward guidance of $225-$250m in 2023 which Smurfit helpfully pointed out “starts in just 15 months time”. Looking at the combination of B2B and B2C, via the Coolbet offering in Latin America, the analysts said GAN brought the “benefits of first-mover advantage” and global B2C.

Gambling.com analyst update

Educating Rita: The team at Jefferies report back from meeting with Gambling.com Group management that the experience in Europe shows that betting and gaming affiliates have withstood the test of time when it comes to disintermediation. They add that there is “little debate” that the competitive US market will continue to benefit from affiliate relationships.

More M&A: Unsurprisingly, the analysts report that M&A remains a “key priority” for Gambling.com. “Among the key focus points for prospective targets is compelling content with opportunities to improve search optimization.”

“Our impression is that deal size is likely in the $20-$50m range, with 1-2 deals per year,” said Jefferies “This compares with larger competitors that have acquired a much larger number of entities with arguably less stringent criteria.”

BGO suspended: The UK Gambling Commission has suspended BGO Entertainment’s license, with failure “to protect consumers a key consideration in the suspension decision”. BGO operates bgo.com and other online brands such as Powerspins and Vegasluck. 

Council moves: Tennessee’s Sports Wagering Advisory Council has selected Mary Beth Thomas as its new executive director. From January the council will be responsible for sports betting regulation in the state. Thomas is currently general counsel in Secretary of State Tre Hargett’s office. 

Illinois: August betting handle was up 8% MoM to $400.4m in August, but revenue was down 29% to $26.8m. Sportsbooks recorded margins of 6.7%, the state collected $4.3m in taxes. Baseball recorded 35% or $139.6m of the handle, with punters betting $127m of the total handle on parlays. Illinois casinos are looking to abolish the requirement to register in-person for online sports betting accounts that could come up during the Illinois veto session beginning today. The Illinois Casino Gaming Association (ICGA) has said it is confident it could get done.  

Ocean color scene: US businesswoman Marian Ilitch has acquired a 50% stake in Atlantic City’s Ocean Casino Resort from Luxor Capital Group through her investment vehicle Ilitch Holdings. Terms were not disclosed. The Ocean completed the renovation of its casino floor earlier this year and is set to undergo refurbish.

Calendar

• 19 Oct: 888 Q3 trading statement

• 20-21 Oct: iGamingNEXT conference

• 25 Oct: Gaming in Germany conference

• 27 Oct: Kindred Q3

• 28 Oct: Churchill Downs Q2, VICI Properties Q3

• 29 Oct: Global Leisure Partners Q3

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com