Aristocrat To Buy NeoGames, Fanatics To Buy PointsBet US Operations

May 15, 2023
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As the sun came up in Melbourne on Monday, two Australian-based companies announced major transactions that significantly alter the global online gaming landscape, one as a buyer and one as a seller.

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As the sun came up in Melbourne on Monday (May 15), two Australian-based companies announced major transactions that significantly alter the global online gaming landscape, one as a buyer and one as a seller.

Aristocrat Leisure announced Monday an agreement to acquire online technology supplier NeoGames for US$1.8bn, at a valuation of $29.50 per share for 100 percent of the NASDAQ-listed company.

The purchase price represents almost a 104 percent premium on the company’s three-month weighted average trading price of about $14.45 per share.

The deal would give Aristocrat a significant presence in the online gaming and iLottery space in addition to its strength as a manufacturer of gaming machines.

“Bringing together NeoGames and our growing Anaxi business will position Aristocrat with global scale and capability in the growing online real money gaming industry,” Aristocrat CEO Trevor Croker said in a statement.

“Through the acquisition of NeoGames and its industry-leading global online RMG platform, this transaction will deliver on our strategy by providing a portfolio of end-to-end solutions for iGaming, iLottery and online sports betting operators globally,” he added.

“We see great opportunities in the combination of our complementary businesses, with clear revenue and growth potential that comes with a complete and seamless online RMG solution.”

Aristocrat has been looking to make a splash in the online gaming space for some time, including a 2021 bid for Playtech that the company’s shareholders ultimately rejected.

This time around, however, NeoGames board is recommending the transaction, and a group of NeoGames shareholders that represent approximately 61 percent of the company’s outstanding shares have committed to vote in favor of the deal, the companies said in their respective releases.

The companies say the deal is expected to close within 12 months.

Shortly thereafter, PointsBet announced it would sell its US business to Fanatics Betting and Gaming for US$150m, a deal that has been rumored in various forms ever since the sports retail giant announced its intent to enter the gaming space.

The deal includes U.S. sports betting, advanced deposit wagering and iGaming operations, as well as a copy of PointsBet’s proprietary software and Banach Technology’s in-play betting software.

Fanatics had explored multiple potential acquisitions of established sports-betting operators in anticipation of entering the sports wagering space over the last several years, with PointsBet frequently rumored as a potential target.

Those rumors only intensified in recent months as PointsBet executives openly explored the sale of its U.S. operations, which had somewhat stagnated as the company altered its strategic focus toward local markets of interest rather than a national strategy.

“Despite the strategic success building a valuable asset in the U.S., there are a number of risks and significant capital requirements to execute on the U.S. Business’ sports betting and iGaming strategy and it is not expected to be cash flow positive in the near term,” the company said in a release announcing the deal Monday morning.

“This reflects the structurally high cost of operating in a state-by-state regulated environment, the requirement to pay partner fees in most U.S. States and continued competition from well capitalised operators.”

The deal also gives Fanatics a significant boost to market access, with PointsBet operating in 14 states, including major limited access states such as New York, Pennsylvania, and Illinois where Fanatics did not have a clear route of entry.

Fanatics is currently beta testing its in-house product in Tennessee and Ohio, although it has yet to fully launch in any U.S. market to date. Fanatics CEO Michael Rubin said the company intends to launch in 12 to 15 states by the beginning of the NFL season in September.

PointsBet’s Australian and Canadian operations are not included in the deal.

The $150m sale price signifies how much the valuation of U.S. sports-betting assets has changed over the last five years. The most apt comparison may be Penn Entertainment’s purchase of theScore, which included the Canadian media brand’s in-house technology stack. Penn agreed in August 2021 to pay $2bn for the company.

Another comparison would be Bally’s purchase of Bet.Works, which closed in 2021, with Bally’s paying $125m for the technology platform provider. The company announced earlier this year that it will move on from the platform after less than two years.

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