View from the City: Headlines from the US mask major market movements in Europe
Simon French, partner at Bixteth Partners, analyses the latest developments in Europe, including the M&A outlook for Entain and William Hill
While the Bally’s Corporation approach to Gamesys Group and the potential spin-off of FanDuel onto the New York Stock Exchange by Flutter Entertainment stole the wider newspaper headlines, industry attention shifted back to Europe during March.
Remarkably after around 10 years of debate and rancour, there finally appears to be a coherent regulatory framework emerging in Germany with the new State Treaty on gambling set to be implemented from 1 July 2021.
Operators already grappling with the transitional regime have signposted a significant short-term hit to the profitability of their German-facing businesses but over the medium term we expect German cashflows to be highly valued by the market given the large absolute market and increasing propensity to gamble.
In Italy, the structural shift to online continues to be accelerated by retail lockdowns. We expect further interest in Italian assets as the dynamic of the market continues to change significantly and potentially undermining the long-term financial viability of the concession-based model. For incumbents this could be particularly lucrative as multiples ascribed to earnings start to expand to reflect a more traditional omni-channel operating environment.
Entain finally muscled in on the Scandinavian opportunity by completing its acquisition of Enlabs. Its pursuit of Tabcorp’s wagering and media division appears to be going less well, but perhaps it is being more disciplined on price.
Closer to home William Hill’s near 19-year tenure as a listed company is due to come to an end shortly, although the efforts of HBK Capital Management to disrupt the takeover has added some uncertainty at a time when it can be least afforded in the US market.
The auction for its non-US assets is due to begin immediately and its UK and European (predominantly the Mr Green business acquired in 2020) online operations will definitely attract strong interest, although the future of its retail operations appears less clear at this stage.