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The Stars Group has bought 62 percent of CrownBet Holdings Pty Limited for approximately $117.7 million. CrownBet is one of Australia’s most popular online sports betting operators.
The remaining 38 percent of the company is owned by CrownBet’s founder and CEO, Matthew Tripp, who will continue to operate the business.
Revenues at CrownBet have grown from AUS$76.5 million in 2015 to AUS$204 million ($158.9 million) in 2017. Unaudited EBITDA for last year came in at approximately AUS$7.9 million ($6.15 million).
Rafi Ashkenazi, CEO of The Stars Group said:
“We are excited to enter the regulated Australian sportsbook market with CrownBet. CrownBet has become one of the fastest growing online sportsbooks in Australia through its strong management team, proprietary technology, mobile app, unique partnerships and market-leading loyalty program.”
Amendments to Australian gambling legislation passed last year led to the regulated online poker operators exiting from the market. PokerStars left on Sept. 11, but Ashkenazi said that the company would not suffer a major revenue decline as the Australian market accounted for less than three percent of revenues.
Revenues for the last reported quarter in Q3 2017 were $329,443,000, so even three percent is a lot of money. CrownBet’s revenues look like they should more than fill the hole left by online poker, but the profit margin looks thin.
At the moment, Stars combines its financial reporting figures for sportsbook and casino, so it has not been possible to see clearly what has been happening inside the sportsbook business. Stars only introduced a sportsbook in June 2015 in the UK, following up with the launch of the BetStars brand in December of the same year.
Now that sportsbook revenues from CrownBet add a significant revenue stream, investors and industry analysts can expect to see the figures broken out in the financial reports – probably from Q1 of 2018.
The move could improve Stars’ positioning in the potential US market; Crown’s platform might be an upgrade from BetStars.
CrownBet continues to own the Betfair branded betting exchange business, so it has not completely exited this part of the market.
The company’s primary business revolves around the Crown Casinos in Melbourne, Sydney and Perth with comparatively few revenues coming from online.
It would not be a surprise if they divested themselves of all their online operations, apart from casino, which fits more naturally into their land-based casino business.
The Stars group has already made headway in recruiting new sports bettors from its online poker player base. Cross-selling has become an important part of making the maximum from each of its constituent businesses.
Currently a “Big Race” promotion combines action with a race-themed poker tournament to be held on March 4, with a Cheltenham Gold Cup horse race promotion on March 16.
Now that CrownBet is becoming part of the Stars family of brands, similar marketing efforts can be expected to increase the range of services and entertainment that CrownBet offers in the Australian market.
M&A in the online gambling industry has had a major impact over the last two years. The Stars Group remains both a potential acquirer and potential target.
The possibilities for the Stars Group to merge with 888 Holdings or William Hill may have gone cold, which could be one of the strategic reasons for making a lower cost acquisition to accelerate organic revenue growth.
If this corporate rationale continues, the Stars Group may hold off any headline bids for large competitors, at least for a year or so, and it may also feel more comfortable in fending off bids if it can achieve the same ends by expanding in a more piecemeal and organic way.