“Flutter Entertainment was the second-best performer in the FTSE 100 in the third quarter of this year (and William Hill was on the fringes of the top ten in the FTSE 250) so someone, somewhere clearly felt the bookmaking sector was ripe for action – and Flutter’s announcement of an all-share deal to buy Canada’s Stars Group suggests they were right,” says Russ Mould, AJ Bell Investment Director. “This is the latest huge deal in the global bookmaking business, following Stars’ purchase of SkyBet last year. Flutter’s decision to reach for Stars is its latest move to position itself for an anticipated boom in sports betting in America, after 2018’s repeal of the Professional And Amateur Sports Protection Act (PASPA).
“Flutter will be looking to build on the position it already has in the USA after its acquisition of FanDuel and agreement with casino operator Boyd Gaming. Betfair, which merged with what was Paddy Power in 2015 to create Flutter, had already acquired US online horse racing business TVG back in 2009.
“This will enable Flutter to capitalise upon the relaxation of American laws on sports betting, which is now legal in 11 states, with seven more primed to announced a launch date. It will also enable the company to diversify further beyond the British and Australian markets, where it is the leader in online punting. Both arenas are relatively mature, tightly regulated and extremely competitive, even after a several rounds of consolidation in the industry.
“The latest deal in the bookmaking and gambling business may also prompt speculation as to which firms will be next to acquire – and which firms will be their targets.
|
|
12-month share |
2019E |
2019E |
2020E |
2019E |
2019E |
|
|
price change (%) |
PE (x) |
EPS Growth |
EPS Growth |
Dividend yield |
Dividend cover |
|
Flutter |
(1.2%) |
28.6 x |
(19.6%) |
11.3% |
2.2% |
1.61 x |
|
GVC |
(20.1%) |
12.2 x |
(19.7%) |
22.8% |
4.7% |
1.73 x |
|
William Hill |
(20.4%) |
19.7 x |
(52.3%) |
33.0% |
4.3% |
1.17 x |
|
888 |
(21.2%) |
13.9 x |
(25.0%) |
12.4% |
4.6% |
1.57 x |
Source: Company accounts, Sharecast, consensus analysts’ forecasts
“Shares in both William Hill and GVC rose on the news of the Flutter-Stars deal and given the last 25 years of British bookmaking trends and the company’s own history it would be no surprise to see a rival spin the wheel with a lunge for Hills.
“The days of the Big Four of the UK high street – Coral, Hills, Labrokes and Mecca – are long gone. Hills and Mecca merged, the combined Ladbrokes-Coral entity is now owned by GVC, which is one of the new Big Three in the UK, alongside Bet365 and the new Flutter-Stars group.
“But Hills does have a good position in the USA. It built its bridgehead as far back as 2011 with a trio of acquisitions. It is already licensed in Nevada, has a relationship with Monmouth Park racetrack in New Jersey and a partnership with Eldorado Resorts that offers access to 26 casinos across 13 states. Eldorado’s move to acquire the rival Caesars Entertainment group could further William Hill’s reach in the USA sports betting market.
“Since the death of its legendary (and eponymous) founder in 1971, William Hill has had six different owners. The retail group Sears bought the bookie back in 1971, as part of a diversification plan, and the UK’s second-biggest High Street operator by number of shops has since been acquired by Grand Metropolitan, when it merged with the rival Mecca Bookmakers organisation (1988), Brent Walker (1989), Nomura (1997) and finally a private equity consortium (1999).
“There has to be a chance that a rival takes a look at some stage, especially as former CEO Philip Bowcock shut down the troubled Australian business, launched a cost-cutting plan designed to combat the revenue hit from the reduction in maximum stakes in Fixed Odds Betting Terminals (FOBTs) and sought to further develop the firm’s online prowess. His successor, former chief digital officer, Ulrik Bengtsson, will be looking to build on that and enhance the bookies’ online capabilities.”
APPENDIX: BRITISH BOOKMAKING: MAJOR EVENTS TIMELINE – LAST 25 YEARS
1998
Ladbrokes buys Coral from Bass but is forced to sell it by the Monopolies and Mergers Commission
1999
After a management buy-out, Coral merges with Eurobet
BetFred buys Demmy Racing
Victor Chandler moves its HQ to Gibraltar, having obtained a licence there in 1996
2000
Bet365 begins trading
Betfair begins trading
Betandwin floats on the Vienna stock exchange, three years after its launch
2001
SkyBet begins trading
2002
William Hill floats on the London Stock Exchange
888 Holdings is established
2003
Candover-Cinven private equity consortium buys Gala
2004
GVC lists on London’s AIM market
Done Bookmakers renames itself Betfred
2005
Gala buys Coral-Eurobet
William Hill buys Stanley Leisure
PartyGaming floats on the London Stock Exchange, eight years after its launch
2006
Betandwin changes its name to bwin
2007
Stan James acquires Betdirect from 32Red
2008
Stan James acquires Betterbet
2010
Betfair floats on the London Stock Exchange
2011
Betfred buys the Tote (and a seven-year exclusive licence for pool betting)
William Hill buys American Wagering and two other US businesses
Bwin Interactive mergers with PartyGaming
2012
Rank acquires Gala Coral’s casinos
William Hill and GVC jointly acquire and break up Sportingbet
2014
BetVictor is acquired by Michael Tabor
Sky sells a stake in SkyBet to CVC
2015
Unibet (Kindred) buys Stan James’ online business
William Hill makes an unsuccessful bid for 888
2016
Ladbrokes mergers with Gala-Coral to form Ladbrokes-Coral
Paddy Power merges with Betfair
GVC acquires bwin.party
888 and Rank make a failed bid for William Hill
Amaya makes a failed bid for William Hill
2017
Kindred acquired 32Red
2018
GVC acquires Ladbrokes-Coral
Stars Group acquires SkyBet
William Hill acquires Sweden’s Mr Green
2019
888 acquires BetBright
Flutter (Paddy Power Betfair, as was) acquires Starts Group
