Thursday, June 20, 2024

Entain examines possible sale of overseas gambling brands

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Entain has hired advisers to oversee the possible sale of several of its overseas brands, as one of Britain’s largest gambling companies considers unwinding a multibillion-pound acquisition spree that hurt its share price.

The Ladbrokes owner is reviewing the future of businesses, including a number snapped up by former chief executive Jette Nygaard-Andersen, and this month hired Wall Street boutique advisory Moelis, according to people familiar with the matter.

Moelis is advising Entain’s board and the group’s recently formed capital allocation committee, and any disposals will be of brands that are not integrated into the company’s technology platform, which makes them easier to sell, the people said.

Among those that could be sold are Netherlands-based BetCity, which Entain bought for £398mn last year, the people added. A local offshoot of Ladbrokes in Australia, Sweden-based Enlabs and Georgia-based CrystalBet, are other brands not integrated into Entain’s main tech platform and under review.

The disposal of overseas brands would allow Entain’s management to focus on revitalising operations in its core markets, such as the UK and Germany, where it has been losing market share. It would also allow the FTSE 100 group to invest more in BetMGM, its joint venture with casino group MGM Resorts International in the US, its fastest-growing market.

Nygaard-Andersen quit last December after a three-year stint that saw Entain’s shares underperform rivals and attracted several activist investors who have pushed for improvements in the way the company was run. Headhunter Spencer Stuart is running a search process for Nygaard-Andersen’s replacement.

Brands that did not use Entain’s in-house technology platform accounted for about a third of net gaming revenues in the first half of last year, according to company figures.

Croatia-based SuperSport, acquired for £599mn in 2022, and Poland’s STS Holdings, which came with a price tag of £750mn last year, are also not on Entain’s main tech platform. But last week Entain’s interim chief executive Stella David highlighted the strong performance of Entain CEE, through which the group owns SuperSport and STS.

Entain separately hired boutique advisory Oakvale Capital to oversee the sale of its Partypoker brand several months ago, Sky News reported this week.

A sharper focus on operations is a crucial part of efforts by activist investors to put the gambling group in a position where it could ultimately be sold or broken up. In 2021, Entain had takeover approaches from both DraftKings and MGM, its joint venture partner, which valued it at a price far higher than its current market capitalisation. Entain shares are trading near a four-year low.

“The capital allocation committee is going through market by market and making some determinations,” said a person familiar with the matter. “It’s all about working out what market Entain wants to be bigger in and what markets are extraneous and could be sold.”

A person close to Entain stressed that “disposals may not necessarily follow as a result of review, it is about assessing how best to maximise value”. Entain and Moelis declined to comment.

Entain formed the capital allocation committee last year as a concession to the activist investors. Ricky Sandler, founder of US-based fund Eminence Capital and the first activist to go public with criticisms, has a seat on the committee alongside chair Barry Gibson and another board director.

At the group’s fourth-quarter results, Gibson said the committee had “commenced a review of Entain’s markets, brands and verticals” with an aim “to help focus the organisation, improve competitive positions and maximise shareholder value”.

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