Gambling Companies Buoyant On US, Depressed Over Germany

September 3, 2021
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Germany and the US have been top of mind for publicly traded gambling companies this earnings season, for opposite reasons: one expanding, the other contracting.

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Germany and the US have been top of mind for publicly traded gambling companies this earnings season, for opposite reasons: one expanding, the other contracting.

Whether Entain, parent of Ladbrokes and bwin, will get a another bid from its US betting partner, MGM Resorts International, or who might win an auction to buy the European assets of William Hill from its new owner, Caesars Entertainment, are top of the billion-dollar mergers and acquisitions agenda.

How to best retain online betting and casino business in Germany in the face of heavy tax and regulation is the focus in Germany for companies ranging from LeoVegas to B2B company Bragg Gaming.

In January, Entain rejected an $11bn MGM bid at a 22 percent premium on its share price, but with Entain shares up over 37 percent so far this year, “a 22 percent premium to the current price would be harder to turn down”, said Ivor Jones, an analyst with Peel Hunt.

Entain’s splashy presentation suggested a potential $162bn market if it targeted esports, social casino and markets yet to be regulated.

It was a presentation with “material of such promise, it made us feel it might be part of a negotiation with MGM”, Jones said on Thursday.

MGM has sold $4.4bn of assets, which makes a bid that much more likely, Jones and other analysts have said.

The potential sale price for William Hill’s non-US operations has risen from a ceiling of £1.5bn to a possible top of £2bn, according to The Times newspaper. That would be a hefty chunk of its £2.9bn April purchase price.

Bidders include 888 Holdings, Apollo Global Management and CVC, majority owner of Germany’s Tipico, according to the British newspaper.

If it won the bid, 888 would possibly sell William Hill’s UK shops to bookmaker Betfred, the Times said.

In Germany, operators are scrambling to minimise the pain of a 5.3 percent tax on stakes, plus tight rules on online slots and poker, currently the only permissible casino games.

The struggle was spelled out most clearly by Stockholm-listed LeoVegas, which said German revenue dropped 81 percent in the second quarter, Jones noted.

Bragg Gaming, which recently listed on NASDAQ, said its German revenue was 65 percent of its total in the first half, but that will probably fall to less than 15 percent by December, according to Jones.

The company said the German tax will halve its game royalties there.

But gambling supplier Aspire Global introduced a product, BuyWin, which it claims offer reasonable payouts to players while still managing to cover the tax.

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