NEW YORK, July 16, 2020 /PRNewswire/ -- Welcome to the global sports betting industry, where merger mania is creating resilient gaming powerhouses. And as sportsbooks are still pulling in tens of millions of dollars every month during the pandemic, one off-the-radar consolidation play offers some real opportunities. Mentioned in today's commentary includes: Eldorado Resorts, Inc. (NASDAQ: ERI), Caesars Entertainment Corporation (NASDAQ: CZR), Flutter Entertainment PLC (OTCPK: PDYPY), Penn National Gaming, Inc. (NASDAQ: PENN), MGM Resorts International (NYSE: MGM).
The first phase of the growing online gaming and sports betting industry was all about getting the tech right. The second phase is about bringing it all together. A pioneer early entrant leader in sports betting technology is hitting Phase II hard, with major acquisitions.
FansUnite Entertainment Inc. (FANS) (FUNFF) launched on the Canadian Securities Exchange on May 5, just two months after scooping up UK-based McBookie--a profitable white-label sportsbook that has seen $350 million (CAD) in betting volume since inception, and now it's hungry for more M&A.
Now, FansUnite's latest merger announcement with Canadian esports darling Askott Entertainment will give it new B2C betting platforms and over 300,000 registered members as a combined entity.
The company has been building an international infrastructure behind the scenes that looks to seamlessly connect the world's leading gaming platforms through new, cutting-edge technology.
Here are 5 reasons why you should keep an eye on the budding online gaming industry:
#1 Gilt-Edged Mergers
Global betting and gaming leader William Hill a British bookmaker--has been snapping up key American sportsbook assets left and right, including Nevada bookmaker CG Technology in November.
Flutter Entertainment (PDYPY)--another dominant British bookmaker--just completed a $12.2-billion takeover of The Stars Group, creating the world's largest online gaming company and huge market share in the US, UK and Australia.
The Stars Group scooped up by Flutter, has been on its own M&A trajectory since 2014, when it acquired the parent company of PokerStars and Full Tilt Poker, followed by its acquisition of UK-focused Sky Betting & Gaming in 2018 as well as Australian online sports betting business BetEasy in December 2019.
After Flutter, Eldorado Resorts (ERI) announced its own mega-merger with industry giant Caesar's Entertainment (CZR). Just two weeks ago, Caesar's announced that it will be accepting Eldorado's massive $18 billion offer, receiving the go ahead from the Federal Trade Commission just a few days later. "We are delighted to announce the FTC's approval of our planned Merger with Caesars, which is expected to create the largest owner and operator of U.S. gaming assets," noted Eldorado CEO Tom Reeg.
And right in the thick of the COVID pandemic, giant DraftKings is merging with Diamond Eagle, a special purpose acquisition company, as well as SBTech, a back-end technology provider. DraftKings' stock has nearly tripled since the merger, taking its valuation to $12.7B less than two months since the event.
The M&A strategy is a tried-and-proven model in this industry. And FansUnite (FANS) (FUNFF) is right on the merger money with its own acquisition fast-track.
In March, the company acquired UK-based McBookie, a white-label sportsbook that offers sports, casino and virtual games wagers to its approximately 10,000 active members. McBookie has garnered over $100 (USD) million in betting volume through its system over the past three years. Now, it's acquiring something much, much bigger: Canadian esports giant Askott Entertainment--a key player that has been working closely with Tier 1 partners since 2013.
The deal will give the combined entity four live B2C platforms that have generated over CAD$350 million in wagers since inception and over 300,000 registered members--and counting. It will also give FansUnite four B2B contracts, with two live already and generating revenue with leading esports companies.
The deal also puts two esports-themed casino games under the FansUnite umbrella--both of which will be released this year on multiple casino games aggregators. And more games are in development, with applications already completed for B2C and B2B gaming licenses and licenses expected to receive in the next few weeks from the Malta Gaming Authority.
Askott was the first to launch a daily fantasy site dedicated to esports. It was the first esports betting brand to receive an Isle of Man back in 2017.
Now, FansUnite is growing from global esports tech leader to a much bigger offering that rounds in traditional sports and casinos for the most complete iGaming solution out there--and it's eyeing a much bigger market.
#2 This Industry Thrives, No Matter What
FansUnite (FANS:CN) has a consolidation plan at prime time for an industry on a fast-track legalization push to grab a share of up to $2 trillion in betting revenues up for grabs. And this is an industry that is not only immune to this crisis but thriving on it.
As it turns out, sports betting powerhouses don't even need the NFL, NBA, NHL, and MLB. New online platforms are offering bets on just about anything you can think of--from online gaming and virtual sports to award shows and reality TV shows. Because of its fantastic flexibility, sportsbooks are still pulling in tens of millions of dollars every month. Covid-19 has done nothing to slow it.
Take Penn National Gaming (PENN), for example. The company dropped to $7.89 in mid-March but has skyrocketed back near its all-time high, sitting in the $30 range currently. That's a 280% gain in just a few short months. This jump was largely due to its timely $163 million bet on Barstool Sports which boasts an audience of younger, and more tech-savvy gamblers.
Industry veteran MGM International (MGM) has also seen a sharp uptick in its share price after bottoming out in March. While the over-100% rise in its share price can be attributed to Las Vegas' reopening, it is impossible to ignore the importance of its online sports-betting platform. While it's Vegas resorts have hit a setback with the resurgence of COVID-19, its online business has only benefitted.
#3 The Floodgates Are Open
FansUnite's merger-mania timing is spot on for another reason, too: The floodgates have finally opened with the removal of various regulatory hurdles.
In 2018, the US Supreme Court delivered a landmark ruling wherein it struck down the Professional and Amateur Sports Protection Act (PASPA) of 1992. Now, nearly two years after the shackles were removed, ~75% of US states have introduced legislation to legalize sports wagering, with sports betting legal in one form or the other in 24 states.
In the U.K. where sports betting has been legal for years, nearly half of the population partakes in activity on a regular basis.
#4 Tech Is Blossoming
This industry is all about the tech, and this is where "bookies" become digital gods.
FansUnite (FANS) (FUNFF) will offer a broad range of match offerings, pre-match and live markets as well as live match streams. But it's a future-facing solution that targets the entire industry, offering Tier 1 players increased regulatory certainty, transparency and significant cost savings for both operators and consumers.
FANS has its own proprietary sportsbook as well as a full-service white label solution aimed at taking in other sports books through the integration of cutting-edge technologies and business growth opportunities, both launching later this year.
This unique white label tech model means that FansUnite is not tying itself to just one market, but rather is looking to quickly seize opportunities wherever and whenever they arise around the world. McBookie alone has had annual betting volume through its system of about $33M over the past three years.
FANS is still hot on the acquisition track, and based on McBookie alone, a couple more similar acquisitions and FansUnite is aiming at volumes in excess of $100M per year, probably in less than 3 years.
McBookie is based in Scotland where it now operates under a sub-license granted by the UK Gambling Commission. Its users are able to settle any betting disputes through the IBAS, a U.K.-based third-party independent arbitrator whose rulings are binding on registered operators up to the tune of £10,000. McBookie withdrawals take, on average, two days. After completing the acquisition of Askott, the new entity has applied for and will likely receive two gaming licenses from Malta: One for the B2B arm and another for B2C.
#5 A Global Market
FansUnite (FANS) (FUNFF) is perfectly positioned to capitalize on these huge markets since it not only offers online sports betting to the UK market--one of the biggest sports betting capitals in the world-- but also because it provides technology solutions, products and services to the entire global gaming and entertainment communities.
FANS has assembled a Board of Directors and management team with decades of experience in traditional sportsbook management, casino, data, and executive responsibilities--and with the Askott acquisition, they've just doubled up on these big names, bringing their years of experience in the industry to over 100, so it's safe to say they know what they are doing. The end goal is to be the next DraftKings or Stars Group--only higher-tech.
It's a small-cap entry point with tremendous opportunity in an industry that is bursting at the seams, hotter-than-hot with M&A, defying any risk--including a pandemic--that the world can throw at it, and ready more than ever for transparency.
By. Sally Dobson
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FORWARD-LOOKING STATEMENTS: Certain information contained herein may constitute "forward-looking information" under Canadian securities legislation. Forward-looking statements may include, without limitation, statements relating to future outlook and anticipated events, such as the satisfaction of the conditions precedent and subsequent consummation of the Askott transaction; expanded consumer base, business base ,offerings and gaming licenses; the growth of the online gambling market; its plan to grow by acquisition; the combined companies' ability to scale its platforms, to enter into new and emerging international gaming markets, to capture the growing demand of gamblers and to become a global gaming leader; the strengths, characteristics and potential of the combined company; the company's ability to become one of Canada's leading gaming companies; the ability to launch a proprietary sportsbook as well as a full-service white label solution aimed at taking in other sports books in the coming year; and discussion of future plans, projections, objectives, estimates and forecasts and the timing related thereto. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of FansUnite to be materially different from those expressed or implied by such forward-looking statements. Matters that may affect the outcome of these forward looking statements include that gaming may not turn out to have as large a market as thought or be as lucrative as thought as a result of competition or other factors; FANS may not be able to offer a competitive product or scale up as thought because of consumer tastes for its online product, lack of capital, lack of facilities, regulatory compliance requirements or lack of suitable employees or contacts; FANS's intellectual property rights applications may not be granted and even if granted, may not adequately protect FANS' intellectual property rights; risk factors for the online sports gaming industry in general also affect FANS including without limitation the following: competitors may offer better terms to potential M&A acquisition targets, or no such target may actually be acquired even if agreements are signed; competitors may offer better online gaming products luring away FANS's customers; technology changes rapidly in the gaming and esports business and if FANS fails to anticipate or successfully implement new technologies or adopt new business strategies, technologies or methods, the quality, timeliness and competitiveness of its products and services may suffer; FANS may experience security breaches and cyber threats; regulators may impose significant hurdles to online gaming companies; FANS may not receive applied for gaming licenses; FANS's business could be adversely affected if consumer protection, data privacy and security practices are not adequate, or perceived as being inadequate, to prevent data breaches, or by the application of consumer protection and data privacy laws generally; the products or services FANS distributes through its platform may contain defects, which could adversely affect FANS' reputation. Additional information regarding the risks and uncertainties relating to the Company's business are contained under the heading "Risk Factors" in the Company's Non-Offering Prospectus dated March 27, 2020 filed on its issuer profile on SEDAR at www.sedar.com. Accordingly, readers should not place undue reliance on forward-looking statements.
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