View from the City: M&A and the race for technology
Bertie Berger from Hudson Sandler analyses the latest round of industry M&A
As two acquisitions complete, one mega-merger commences. The gambling industry’s consolidation trend continues to interest investors with the race for technology taking centre stage.
In early October, the UKGC approved Rank’s £115m acquisition of AIM-listed Stride Gaming, while JPJ Group (now Gamesys Group) completed its acquisition of Gamesys assets for £490m. For Rank, the strategic merit will be the effective doubling of Rank’s digital revenues and, as ShoreCap pointed out, the added benefit of “bringing their platform in-house through Stride’s proprietary technology”. For Gamesys, the combined group now has, in Berenberg’s view, the “technological independence” needed to strengthen its position across key markets.
On 4 October, Flutter Entertainment and The Stars Group (TSG) surprised the industry with a bold tie-up, driving shares up 14% and 30% respectively. The Financial Times’ Lex column wrote that the increase in Flutter and TSG’s share prices both “looked about right” given “the implicit premium for owners of over-geared Stars was about 36%”. Bloomberg Opinion added that the deal “brings that immediate benefit of sharing the debt burden,” allowing the companies to share technology and delivering significant scale.
The mega-merger also prompted a volley of questions. The Sunday Times, while acknowledging this would be “the real deal”, warned competition clearance could be a hurdle—even factoring in that “anti-trust authorities tend to focus on whether mergers substantially lessen competition rather than confer significant market power.” In addition, Peel Hunt speculated that GVC CEO Kenny Alexander “could have one more big transaction up his sleeve and could even target Stars once the competition watchdogs have combed through the [Flutter] deal”.
With Rank and Gamesys now owning their technology, and the Flutter/Stars Group seeking to drive the scale and performance of their combined platform, technology looks set to affirm its place as a key battleground between operators. This new cyberspace-race will consume smaller players, punish ageing platforms, and likely prompt a rush to more intuitive AI-enhanced offers.
Emerging a winner from this contest will be vital for operators with global ambitions and investors will be watching closely to weed out the stragglers.