4 hours ago
7
If you want to crack the booming US gambling market as a UK or Irish company, it’s best to find an American partner, buy an American business, or just emigrate.
Flutter, the Dublin-based owner of Paddy Power and Betfair, has been through the collection. It took a punt on FanDuel, then just an online fantasy games business, in 2018 as an option on US liberalisation of its gambling rules. When states in the US did indeed start to open up, it gained full control. Last year, and with FanDuel now its biggest division, Flutter switched its listing to New York. Entain, the Ladbrokes and Coral group that remains in the FTSE 100 index, has a US joint venture with MGM Resorts.
Denise Coates of Bet365 will have taken note. The lure of a US jackpot is the most likely explanation for why she is exploring a full or partial sale of the family-owned company, as revealed by this newspaper. You’d stake a large sum that any deal will involve US money or a US partnership. The US is the obvious place to go, and the politics of expansion are easier there when you can present a local face.
The point about the US market is that it is already big – and on the way to becoming enormous. Flutter talks about a $70bn “market opportunity” in North America, having generated $5.8bn of revenue from FanDuel last year. Bet365 has taken a more cautious approach, and has only recently won licences in 13 states, but the market itself is still in the “land grab” phase. Some of the biggest states are yet to liberalise fully.
The appeal of Bet365 for US private equity investors or firms will be its technological and back-office expertise, just as it was with the others. It may sound odd to think of US firms as novices in any tech-related field, but that’s how life has been in gambling. Bet365 brings the history of being the pioneer in the complicated business of “in-play” betting – betting on the timing of the next corner in a football (or soccer) match, for example.
Any would-be investor would surely be mad to let Coates head for the exit immediately. She built the business from a portable building in a car park in Stoke-on-Trent in 2001, anticipating that betting would go online with the arrival of the internet. It may now be worth £9bn or so. She is 57 and is a hands-on boss – you’d want her on board for as long as possible.
Thus a two-stage deal looks the most likely. First, bring in outside capital and a US partner. Then, after a few more rounds of expansion and with a succession plan in place, make a fuller exit, possibly via a listing on a US stock exchange. Alternatively, on the outside chance there is a would-be acquirer for the whole business today, bidders know they have an opportunity.
Coates seems to have been warming up for this moment for a while. Bet365 has stopped taking bets from China, where betting is illegal, and ownership of Stoke City football club, which would surely be seen as non-core by most investors, was transferred to Coates’s brother.
None of which guarantees that a deal will be found, but the odds are favourable. The US market is hot and Bet365 is the last big, tech-savvy UK operator that is up for grabs for a US investor. Coates’s timing looks excellent.
