Multinational sports betting and gaming group Entain (ENT) has acquired Canada’s leading online sports betting brand Sports Interaction in a deal valued at C$300 million or roughly £174 million.
Ladbrokes owner Entain acquired the brand via the purchase of Avid Gaming, which exclusively licenses the Sports Interaction trademark and provides proprietary online and gaming products to the Mohawk Council of Kahnawake.
Like many online betting businesses, Sports Interaction has seen strong growth throughout the pandemic with revenues rising 40% last year to C$76 million or £44 million, generating EBITDA (earnings before interest, taxes, depreciation, and amortisation) of C$18 million or £10.4 million.
Entain expects to deliver around C$15 million or £8.7 million of synergies in 2023 from savings in procurement, technology and content, which if achieved almost halves the acquisition multiple to seven times EBITDA. Entain shares traded 0.6% lower at £15.95.
GOOD DEAL BUT RISKS REMAIN
Gambling research consultancy Regulus Partners called the deal ‘highly attractive’ and said the projected synergies could be ‘significantly greater’ than estimated given that the brand had been underperforming.
However, despite viewing the deal as financially attractive, Regulus warned there were reasons to be cautious. Sports Interaction's high historic operating profit has benefited from low/no tax and lack of competition which is due to change ‘dramatically’ in Ontario when online sports betting is legalized in April.
Perhaps more troubling, Regulus highlight that the Canadian Mohawk tribe selling the brand are ‘very smart’ and perhaps do not fancy their chances of operating in a US-style market.
Regulus commented: ‘There are a few occasions when stakeholders sell what looks like an invaluable and well-placed asset at just the right time before all the rules of the game change. The Mohawks may well have just pulled that off.’
FLUTTER THROWS HAT IN THE RING
In other gambling news Paddy Power Betfair owner Flutter Entertainment (FLTR) chief executive Peter Jackson has written to the Gambling Commission in relation to the ongoing UK National Lottery tender, according to investment bank Berenberg.
In December, Flutter purchased Italian gambling company Sisal, which has an established lottery business, and Jackson has apparently made the case that awarding the National Lottery contract to Sisal would keep the contract in British hands.
Sisal is one of four bidders for the contract, which include current operator Allywn, Camelot, and Northern and Shell. The new contract is due to come into effect in 2024.
