Welcome to mergers and acquisitions, European style. For today’s episode we first visit Slovenia, in particular the country’s sports lottery. Two suitors were close to buying a stake in the state run sports betting monopoly: Entain and Superbet.
Then poof. The wedding is off. Slovenia’s Ministry of Finance confirmed that talks stopped as both companies called off the nuptials.
“We can confirm that, after weighing the opportunities, Entain has decided not to continue the process for the purchase of a stake in Sports Lottery for the time being,” stated a representative from the company.
Entain provided no other details for its decision to walk away from a deal in which they would have paid between €50 million (US$54.5 million) and €60 million for the Sports Lottery.
Then there was the opposition on the local front and residents opposed to a foreign company owning their lottery. Part of the opposition related to its impact on the sports scene as lottery revenue helps fund national sports initiatives, according to Yogonet Gaming News.
The Olympic Committee of Slovenia, the Football Association of Slovenia, and the Skiing Association of Slovenia own a 57 percent stake. But that didn’t guarantee the percentage would remain that way if the lottery was sold.
Superbet, a Romanian-based casino group with operations in ten European countries, was expected to bid higher than Entain for the lottery.
Entain’s recent news of its proposed purchase of Polish sports betting company STS Holding for £750 million (US$952.5 million) may have played a role in the decision to walk away.
Entain’s decision to finance the deal drew the ire of Eminence Capital, a shareholder that owns a 2.1 percent stake. “While we can support the company pursuing seemingly rational acquisitions, funding them with highly undervalued equity is an empire-building, shareholder value-destroying strategy,” said Eminence CEO Ricky Sandler.
Third Bridge analyst Lara Martinez says Entain can leverage deal-making in Central and Eastern Europe to diversify revenue growth, which depends too much on the U.S. market, where it has a 50 percent stake in BetMGM.
“Entain has been rapidly expanding its presence through M&A, “Martinez. Said. “According to our experts, Entain has the potential to further enhance its market share in Europe. However, at present, the majority of the company’s revenue and growth are associated with the US market.”
Entain has been on a spree for two years. Eastern Europe doesn’t have as mature of a market then Western Europe, indicating more potential.
Nations in those regions don’t yet have online wagering regulations, but are soon expected to change that, making those jurisdictions more attractive to outside operators.
“Entain’s primary focus for regulated markets in Eastern Europe includes Romania, the Czech Republic, Slovakia, Poland, and Croatia. Additionally, Hungary and Bulgaria are expected to implement online regulations in the near future,” said Third Bridge’s Martinez.
Entain could be asking for an unwanted takeover advance from MGM Resorts International, ultimately at a price that doesn’t reward Entain investors.
