Bally’s Acquires Gamesys As Online Gambling Push Continues

The rolling effort on the part of the US sports betting and online gambling sector to subsume the UK-listed gambling sector continues after the news that Bally’s Corporation is in the process of acquiring Gamesys in a deal that values the latter at $2.7bn.

The news follows from Caesars’ buyout of William Hill and MGM’s failed attempt to buy Entain earlier this year.

It adds to the sense that US gaming operators are looking at the European listed sector as choice morsels to be gobbled up at will. Even the rumored plans by Flutter to float a portion of FanDuel in the US look like part of a defense to forestall a full bid.

Is Bally’s and Gamesys Different?

But there are reasons why Bally’s cash and shares offer for Gamesys makes more sense on paper than a lot of M&A deals.

For a start, it looks like it is one of the biggest aqui-hires ever. With Gamesys boss Lee Fenton set to take over the CEO post at Bally’s, this looks less like a buyout and more of a reverse takeover at the board level.

By putting Fenton in charge, it can be hoped that the core contingent from Gamesys, which has contributed to its success over the years, will remain in place.

This core, it should be added, has been with the firm through its somewhat confused and confusing history of M&A. This is the third significant transaction involving Gamesys and its major brands, which have already been through a separation and an eventual reunion.

Hitting the Jackpot

Of course, Bally’s itself has been through its own transformational M&A journey of late. As Barry Jonas, an analyst at Truist Securities, said on the news that it will “further solidify Bally’s as a credible contender in the emerging US sports betting and iGaming market.”

The latter point is essential. Gamesys is an avowedly gaming-led business and a leading one at that. From JackpotJoy and Vera&John through to Megaways.com, Monopoly Casino, and Virgin Casino, its brands are market-leading.

The deal also couldn’t be better timed. Bally’s is a buyer as it looks to morph into an online gaming powerhouse precisely when the US is poised for an online gaming breakout. As BettingUSA has said recently, the evidence from where online gaming is available shows that it is the true opportunity for generating tax revenues, not sports-betting.

Yes, saying the expansion of online gaming will happen and expecting it to happen overnight are two different things. It is still only legal in a handful of states, and the prospects for further expansion are set at a trickle.

A Worldwide Opportunity

But while Bally’s is waiting, it will be cashing in elsewhere around the world, notably from the UK, Sweden, Spain, and Japan. Only the latter of these – worth 20% of total revenues in 2020 – will there be any qualms given its ‘dark grey’ status.

In its recent results, Gamesys said it adjusted EBITDA rise by 30% to £206m ($282m) from revenues that rose 29% to £727m ($995m).

The deal makes Bally’s a true force to be reckoned with, not just in the US. For reference, William Hill made £482m in online gaming net revenue in 2020, and Entain made £1.53bn.

Indeed, such is the sense of the deal that investors in the UK believe Bally’s will ultimately have to pay more for the asset. On the day of the announcement, analysts at Davy suggested the offer price at £18.50 per share was too low.

The market appeared to agree as it sent the share price up 18% on Wednesday to £19.35, implying investors think another bidder might crash the party.

A rival bid would also have some time to work with. Jonas suggested the deal would take at least a year before coming to fruition, given the various regulatory hoops that will need to be jumped through.

But with 30% of shareholder acceptances ahead of the formal bid – which will need to be lodged before the 21st of next month – there is now momentum on the side of Bally’s.

Its success will leave the UK-listed sector severely diminished. The action is all happening elsewhere.

No wonder analysts at Peel Hunt were quick to suggest that 888 would be next on the block. And nevermind that Peel Hunt, as house broker, has been trying to sell 888 to anyone who cares to be looking for a while now.

It is undoubtedly true that US developments have thrown the corporate sectors on both sides of the Atlantic into unprecedented flux – and it isn’t over yet.