Mergers-Acquisitions – Page 3 – OPINIAO-PUBLICA24-7

DraftKings Buying Microbet Provider Simplebet

DraftKings (NASDAQ: DKNG) said it will acquire Simplebet Inc., a provider of microbetting services, to bolster its suite of in-game betting products.

The Simpletbet logo. DraftKings said Wednesday it’s acquiring the microbetting provider. (Image: Simpletbet)

Financial terms of the transaction weren’t disclosed. When rumors of the deal surfaced in May, it was speculated that DraftKings could pay $120 million to $170 million for privately held Simplebet. The pair have an existing relationship. In 2021, they inked a deal in which Simplebet provided microbetting services to DraftKings Sportsbook.

The Proposed Transaction would allow for the integration of Simplebet’s proprietary machine-learning models into DraftKings’ best-in-class pricing and technology platform to create highly accurate betting opportunities during every moment of a game,” according to a statement issued by the buyer. “The Proposed Transaction would improve the quality, breadth and speed of data throughout the DraftKings trading lifecycle, and would unlock a faster and more frictionless experience for the Company’s customers.”

Boston-based DraftKings is Simplebet’s largest client. The target was valued at $210 million following a Series C funding round of $28.6 million three years ago.

Simplebet Could Be Smart Deal for DraftKings

For DraftKings, the purchase of Simplebet could prove shrewd because microbetting is a fast-growing derivative of in-game or live betting — areas operators are pushing into in efforts to increase handle and revenue.

In traditional live wagering, a bettor would wager on an updated total or spread, but microbetting expands upon that concept. The services offered by Simplebet allow operators such as DraftKings to present customers with bet options such as the outcome of the coin toss in a football game, balls and strikes in a baseball game, and so on. Bettors like those wagers because the outcomes are binary, and with the outcomes being known immediately, the bettor can decide to take their winnings and potentially place another bet or cut their losses.

In-game wagering has long been popular in mature sports wagering markets such as Australia and Europe, and it’s rapidly gaining momentum in the US. Underscoring why DraftKings may have found Simplebet to be an alluring target is the need for technology to make live and microbetting work.

“Simplebet has developed a scalable, maintainable, and highly performant foundation for a live betting platform that is algorithm oriented. With machine learning and automation to supplement the betting experience, Simplebet’s proprietary models offer more in-play moments for bettors,” according to the DraftKings statement.

Inside Simplebet’s Story

New York-based Simplebet was founded in 2018 and is a business-to-business provider of microbetting markets on college basketball and football, Major League Baseball (MLB), the NBA, NFL, and the NHL.

In addition to DraftKings, Simplebet sportsbook clients include Caesars Sportsbook, ESPN Bet, FanDuel, and Hard Rock Sportsbook, among others.

It’s not yet clear if those operators will remain with Simplebet when it becomes part of DraftKings or if they’ll pursue microbetting relationships with Simplebet competitors.

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Flutter Mulls Acquisition of Playtech’s Snaitech Unit

Flutter Entertainment (NYSE: FLUT) is reportedly in talks to acquire Playtech’s (LSE: PTEC) Snaitech business, news that sent shares of the target’s parent soaring in London trading.

Flutter FOX Bet — The Flutter logo as seen in an investor deck. The company is reportedly in talks to acquire Playtech’s Snaitech unit. (Image: Flutter Entertainment)

Media reports indicated FanDuel could pay as much as $2.56 billion for Snaitech, which represents a healthy premium to Playtech’s market capitalization of about $2.12 billion. Founded in 1990 and branded as Snai, Snaitech offers horse and sports wagering services in Italy and operates more than 49,000 gaming and lottery devices in that country.

The website, snai.it, offers a vast range of gaming and entertaining services including all online products: sport and horse racing betting, poker cash and poker tournament, skill games, casino and cash games, betting on virtual events, forecasts, bingo, lotteries and number games, virtual sports. Betting and casino apps are available also from website using a technology that adapts to all devices,” according to the company.

Snaitech also has bit exposure to Austria and Germany through its 2022 purchase of Happybet. At one point today, Playtech shares were up 22% on the news, marking the stock’s biggest intraday pop in nearly three years.

Playtech Deal Could Finally Come to Fruition

Currently, there’s no indication as to how advanced the talks are between Flutter and Playtech, but the would be seller said it is in exclusive negotiations with the prospective buyer.

Playtech has long been the subject of consolidation speculation, but with nothing to show for it. The sale of Snaitech could change that. In July 2023, Playtech attempted to acquire 888 Holdings Plc (OTC: EIHDF) for $890 million, but was turned away.

In October 2021, Playtech agreed to a $2.8 billion deal with Aristocrat Technologies and two other suitors emerged for the gaming software company, but those two suitors ultimately pulled their bids and the deal with Aristocrat fell apart. In July 2022, Playtech scrapped plans to list Caliente Interactive’s Caliplay unit on a US exchange via a reverse merger with a blank-check entity.

For Playtech, the allure in selling Snaitech is that such a transaction would allow the seller to become a full business-to-business (B2B) player in the European gaming scene while reducing its exposure to volatile consumer spending trends.

Deal Would Boost Flutter’s Italy Footprint

For FanDuel parent Flutter, the potential acquisition of Snaitech makes sense because it would increase the buyer’s presence in Italy, which is the Eurozone’s third-largest economy behind Germany and France.

In 2022, Flutter paid $2.2 billion for Italian lottery giant Sisal. Prior to that acquisition, Flutter’s PokerStars and Betfair were operational in Italy with significant market share.

Italy is Europe’s second-largest regulated gaming market after only the UK. Adding to the allure of Snaitech for Flutter is the point that while penetration of online wagering in Italy has surged in the aftermath of the coronavirus pandemic, it remains far below the rates seen in comparable markets such as Australia and the UK. That implies there’s ample room for growth and Flutter’s potential purchase of Snaitech could be validated over the long-term.

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Endeavor Looking for Buyers for Sports Betting Biz, Including OpenBet

Endeavor Group Holdings, Inc. (NYSE: EDR) is looking to sell its sports betting and data arm comprised of OpenBet and IMG ARENA.

PGA Tour Endeavor Fenway LIV Golf — Endeavor CEO Ari Emanuel. The company is looking to sell its IMG Arena and OpenBet units. (Image: Getty)

The company said those divestments are part of an effort to pat with select assets ahead of the $13 billion go-private transaction with venture capital firm Silver Lake announced in April. Los Angeles-based Endeavor reported second-quarter results earlier today.

During the quarter, we began to actively market the businesses comprising the Sports Data & Technology segment, OpenBet and IMG ARENA. As such, for financial reporting purposes, these businesses are considered Held for Sale and the Sports Data & Technology segment is presented as discontinued operations in the Q2 2024 consolidated interim financial statements. During this process, these businesses will continue operating as usual,” according to a statement.

The company did not say if it’s held talks with any potential suitors as of yet nor did it mention potential selling prices for IMG Arena and OpenBet.

Endeavor Quick to Sell OpenBet Following Purchase

Endeavor is quickly looking to sell OpenBet after announcing in September 20221 that it would pay $1.2 billion to the company then known as Scientific Games for the business.

The buyer was originally supposed to pay $1 billion in cash and $200 million in stock for OpenBet, but that price was lowered to $800 million in June 2022 with Light & Wonder (NASDAQ: LNW) — formerly Scientific Games — landing $700 million in after-tax proceeds.

OpenBet was folded into Endeavor’s Owned Sports Properties segment, which includes UFC, the Professional Bull Riders (PBR), and Euroleague.

Endeavor positioned the acquisition of OpenBet as an addition to the IMG Arena business, which provides data and other technology to sportsbook operators. It’s not clear if Endeavor will break-even on OpenBet, turn a profit or take a loss, but it could be an opportune time to sell the unit because a technology arms race is forming in the sports betting industry.

OpenBet Has Had Plenty of Owners

OpenBet was founded in 1996 as Orbis Technology and over its nearly three decades in business, it’s already been through a slew of owners. In 2000, NDS Group, a unit of News Corp., acquired Orbis.

A decade later, Orbis was renamed OpenBet and in 2011, NDS sold the sports betting technology business in a management-led buyout that was supported by private equity firm Virtuvian Partners. Five years later, NYX Gaming Group bought OpenBet. In 2016, Scientific Games purchased NYX, folding OpenBet into its SG Digital arm.

According to its website, OpenBet clients include BetMGM, DraftKings, FanDuel, Paddy Power, PointsBet, Super Group, and William Hill, among others.

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Penn CEO Quashes Takeover Speculation on Earnings Call

Penn Entertainment (NASDAQ: PENN) delivered second-quarter results earlier Thursday and recent speculation that the regional casino operator is a takeover target was briefly addressed on the company’s conference call with analysts.

Regarding consolidation rumors of which their firms at the center, the typical response by executives at companies in any industry is that they don’t comment on speculation. In response to a question from JPMorgan analyst Joseph Greff, that was the approach taken by Penn CEO Jay Snowden, but he added rumors aren’t always accurate.

What I will say is that as a company and as a board, we’re always and always have, always will evaluate opportunities to enhance value and we’ll continue to take actions that we believe are in the best interest of the Company and our shareholders,” Snowden said. “And, I would say, don’t believe everything you read.”

Takeover chatter pertaining to Penn started in late May when investor the Donerail Group sent a letter to the gaming company’s board of directors encouraging it to sell itself to increase shareholder value. Related speculation ramped up several weeks later amid reports that rival Boyd Gaming (NYSE: BYD) was considering a bid of $9 billion or more for Penn.

ESPN Bet Improvements Could Limit Penn Desire to Sell

In the weeks since the Penn takeover rumor emerged, analysts have widely speculated that Boyd is an unlikely buyer if the target’s interactive unit, including ESPN Bet, is part of the package and that a third party may need to get involved to buy the digital business.

There’s also been discussion of Penn being a reluctant or an unlikely seller because ESPN Bet isn’t a year old and the operator likely wants to see how the sports betting unit performs over the course an entire football season. Penn’s interactive unit posted a second-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $102.8 million, but that was far better than the company’s prior guidance of a loss of $135 million.

“Management cited improved risk & trading and parlay mix driving NGR growth (likely at high-flow through), with better than guided losses also benefiting from further sequential improvement in promo reinvestment,” noted Stifel analyst Steven Wieczynski in a note to clients.

ESPN Bet monthly active users surged 138% year-over-year with Penn management highlighting benefits from improved efficiencies, risk management, parlay offerings as drivers of improved structural hold.

Penn Casino Sales Face Complexities

Penn runs 43 gaming venues in 20 states, implying it has an extensive menu from which to select for potential asset sales, but Snowden acknowledged there are complexities associated with such transactions.

“With regard to your specific question on assets, just remember that our assets, land-based assets are all part of different leases, and so it’s not as simple and easy as you just sell off an asset,” the chief executive officer told Greff.

Gaming and Leisure Properties (NASDAQ: GLPI) owns the bulk of the land on which Penn casinos reside and would have to approve any sale of individual venues’ operating rights to another company because the buyer would enter into a new lease agreement with the landlord.

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Caesars CEO Reeg Says No Involvement with Penn, Eyes Buybacks

Caesars Entertainment (NASDAQ: CZR) CEO Tom Reeg told analysts the company isn’t “even tangentially involved” in the takeover scuttlebutt that’s recently surrounded rival Penn Entertainment (NASDAQ: PENN).

Reeg made the comments Tuesday evening on his company’s second-quarter earnings conference. In response to a question from Wells Fargo analyst Daniel Politzer, the Caesars chief executive officer noted that while predecessor firm Eldorado Resorts frequently used equity for acquisitions that fueled growth, he’s not inclined to look at the option today because Caesars stock has struggled.

I’m not an issuer of stock at $36 wherever it was today (Tuesday). We’re going to be a significant even more significant free cash flow producer as these as the project spend runs down,” said Reeg.

At this writing, shares of Caesars are up 13% today, but the stock is down 30% over the past year, making it one of the worst-performing gaming names over that period.

Reeg Not Going to Give Away Caesars Stock

Speculation about Penn being a takeover target dates back to late when one of its investors suggest the company should consider a sale. Subsequent rumors to that effect have centered around Boyd Gaming (NYSE: BYD) potentially making a move on Penn, but neither regional casino operator has commented to that effect.

With Caesars already having exposure to many of the markets in which Penn operates and the former focusing on reduce, Reeg is likely shooting straight when it comes to his company having no involvement in the purported Penn sweepstakes. He’s also adamant that he’s “not going to give our stock away.” Rather, he’s focusing on ways to eventually return capital to shareholders when capital spending on new projects falls off the operator’s to-do list.

“So that will open up a leg of shareholder returns so you should expect us to start buying in some of our stock. If the stock moves to a different neighborhood that can change,” Reeg said.

As more casino operators have initiated and increased quarterly dividends and boosted share repurchase, Caesars has done neither as it’s worked on trimming one of the largest debt burdens in the industry and opening new regional casinos in Nebraska and Virginia.

Lower CapEx, Interest Rates Could Help Caesars

Caesars’ shareholder rewards efforts could be boosted by a reduction in capital expenditures and interest rates, the latter of which could arrive as soon as September.

“A significant portion of CZR’s project capex rolls off this year, Digital earnings before interest, taxes, depreciation, and amortization (EBITDA) should accelerate, and potential non-core asset sales (we believe, the Promenade) come closer to fruition,” wrote B. Riley analyst David Bain in a note to clients today. “Given a more benign interest rate environment — we calculate $60 million of interest savings/new FCF for every 100 basis point drop drop in rates — we believe CZR’s shares can sustain upward momentum from current valuation levels.”

Reeg previously expressed a willingness to sell “non-core” casinos, a view he reiterated on Tuesday’s call.

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