Market Alive to Party’s Sportsbook Ambitions
Market Alive to Party’s Sportsbook Ambitions
Unibet chief executive Petter Nylander said the possibility of his company succumbing to a bid from PartyGaming would “depend on the offer” after it became clear that the next acquisition target for the latter operator is likely to be within the sports-betting arena.
PartyGaming has made two acquisitions in as many months, snapping up Cashcade for an initial £71.9m in late July and World Poker Tour last month in a deal worth up to $12.4m.
But speaking during the earnings call for the publication of the company’s first-half figures last Friday, Party chief Jim Ryan suggested that it was the company’s sportsbook operation that was most in need of a further M&A-driven boost.
Analysts immediately began scouting around for possible targets, with many landing on Malta-based sports-betting and gaming operator Unibet. Petter Nylander, chief executive at the Sweden-listed firm, acknowledged the chatter surrounding PartyGaming’s possible acquisitive intentions. “We are reading what you are reading,” he said before adding that a bid aimed in his company’s direction would be “interesting”.
Asked where he himself would look if he was looking at a good-sized acquisition, Nylander mentioned Bwin and Sportingbet as other possible contenders if Party was looking to fulfil its stated goal of achieving top three status in all its verticals.
Unibet would be possibly the ‘cleanest’ acquisition that Party could make if it is looking at the larger end of the sports-betting spectrum. Unlike Sportingbet, Unibet has no unresolved legacy US issues, having never taken a US bet, and neither has it ever operated in Turkey, again unlike Sportingbet.
Unibet is listed on the Nasdaq OMX Nordic List and has a market cap of just under SEK5bn or £425m. If Party were to embark on a deal of that size it would most likely have to involve equity.
Martin Weigold, finance director at Party, told analysts last week Party had cash in hand of around £40m and would be able to raise roughly £100m more form the banks in debt. Weigold also said the company had passed on a possible acquisition of GigaMedia’s Everest Gaming after completing a “good deal of due diligence”.
Intriguingly, Fidelity appears as a significant investor in all three of PartyGaming (9.98 percent), Unibet (10.4 percent) and Sportingbet (12.99 percent). It also has a 5 percent stake in Bwin and a near 10 percent stake in 888.
However, sources cautioned against reading too much into this wide-scale sector involvement. One industry insider said: “They would obviously be pretty happy for deals to be done, but they don’t care who gets the synergies. It’s kind of a no-brainer for them.”
Analysts at Numis have interpreted Party’s earnings call comments as meaning the company is more likely to be looking to buy rather than build. Said analyst Wyn Ellis: “Party has made clear its M&A objective is to acquire companies that can put it into a top three position in each of its four product verticals and also deliver revenue and cost synergies. Sports betting is a vertical where its ambitions currently fall short.”
He added that Party has put on hold its live-betting ambitions as it looks for a possible acquisition to vault it into the top three. “This suggests a substantial transaction is being considered,” Ellis suggested.
PartyGaming made its first foray into sports betting with the €102m acquisition of Gamebookers in August 2006. However, that deal is widely acknowledged not to have succeeded as the company would have liked, and despite having launched its own branded PartyBets operation, the business has been struggling to make its mark in a highly competitive area.
According to Friday’s results, Party’s combined sports-betting operations saw revenues fall 13 percent over the six months to June to $7.7m.
One analyst said Party would have learnt a lesson from Gamebookers. “It clearly has not delivered the margin,” the analyst said. “They lost the management, and that is one component. But the market also got a lot tougher, the competition has become more intense, and Gamebookers was just not up to the task. (Party) needs to do something against a backdrop that is getting tougher.”
One investment banker commented that Party has a “gap to fill” in terms of its offering, and that the Gamebookers deal had failed to deliver the promised exposure to sports betting that the company needs. “They’ve tried to grow it organically, but the acquisition was clearly not a game-changer. It hasn’t got them very far.” He added that the company would need to be “cautious” on geography.
2 Sep, 2009 / GamblingCompliance Ltd
