Unibet owner, The Kindred Group, finally completed its £176.5 million ($218.3 million) takeover of Gibraltar-based 32Red.
Most attention goes to the big multi-billion dollar deals that often fail to come off. But this deal is a reminder that further down the scale, consolidation in the online gambling industry continues.
Kindred launched its bid on Feb. 23 and has now received acceptances from over 50 percent of AIM listed 32Red’s shareholders. That plus the approval gained on March 23 from the gambling regulator in Gibraltar is sufficient to make the deal “unconditional.”
When he launched the offer, Kindred CEO Henrik Tjärnström explained:
“The acquisition of 32Red is consistent with our multi-brand strategy and stated desire to grow our business in locally regulated and soon to be regulated markets. 32Red is a high quality, customer-focused business with a similar culture to Kindred Group’s and we are delighted to welcome 32Red and its team into the Kindred family and look forward to further developing the brand going forward.”
32Red offers more UK market share for Kindred
Ladbrokes Managing Director Ed Ware founded 32Red. Unsurprisingly, he used his industry experience to build brands that focused on the UK market.
After taking its first online casino bet in July 2002, 32Red grew to add online poker, sports betting and bingo. It made its first acquisition in 2015 with the purchase of the Roxy Palace casino business for £8.4 million.
In December 2016, it became one of only three Authorised Betting Partners to British Horseracing alongside Betfair and Bet365.
The company may only have a small market share in the UK. But it will increase Kindred’s market footprint by a desirable amount.
Kindred shares have risen four-fold in less than five years
Kindred is a Swedish company, listed on the Nasdaq Nordic exchange, with a very strong market presence in Northern Europe. A market cap of $2.3 billion is enough to make it the seventh largest online gaming company in the world.
Its main strength comes from the Unibet brand that offers casino and online poker. However, the majority of its revenues come from sports betting.
In recent years, Tjärnström has made several acquisitions that have helped to grow the business:
- In July 2015, he bought the online business of UK operator Stan James Group plc for £19 million ($23.6 million) in cash.
- This was followed a month later by the purchase of iGame Holding plc for an initial price of €59 million ($63.5 million); a further consideration of up to €20 million to be paid based on performance.
One characteristic that these and the 32Red acquisition have in common is that they all operate online poker on the MPN software platform. This reduces technology risk, and gives Kindred the option to retain successful brands, or merge them into its own software platform.
Until it launched its own software platform, Unibet operated its online poker business on MPN.
Tjärnström has proven that he can manage acquisitions to create shareholder value. An investor who bought shares in the company in 2012 will have seen a return of around 400 percent in less than five years.
Kindred is itself an attractive target
If nobody gets in Kindred’s way, Tjärnström looks set to build the scale he wants by consolidating the smaller online sportsbooks rather than by launching an ego-boosting multi-billion dollar leveraged bid for one of the industry giants.
So far, Kindred has not yet been caught up in the titanic M&A struggles that have affected all of its publicly listed competitors. That may not last for long.
William Hill, 888 and Amaya have all made and fought off deals, but are clearly hungry to build more scale. Arguments could be made for each of them to merge with Kindred.
Amaya in particular lacks a large sports betting business. During it last investor presentation, Amaya said that it expects its sports betting business to generate around three percent of its revenues in 2017.
An Amaya/Kindred merger might create a much more balanced business. The prospect may appear far-fetched, but in the current environment, online gaming CEOs are looking at every possible combination.
