Sportingbet has confirmed it is in “advanced discussions” to acquire Australian online bookmaker Centrebet in a cash deal valuing the company at AUS$175m (c£115.25m).
The bookmaker said an acquisition of Northern Territory-licensed Centrebet would accelerate its “strategy of increasing its exposure to regulated markets and of geographic diversification.” The acquisition would be earnings enhancing in the first full year post-integration, said the group.
The Australian online sports betting market has experienced double digit annual revenue growth since the lifting of interstate advertising restrictions from late 2008. Centrebet however warned in November last year that its FY 2010 profit would be halved due to significant investment in “Project Rocket”, aimed at doubling its share of the Australian corporate bookmaking market to 20% by 2015. Centrebet consequently reported a first-half net profit of AU$1.8m, down 71% from the previous year.
The bookmaker revealed at the time of unveiling “Project Rocket” that its 5% share of horse racing wagering turnover among corporate bookmakers lagged well behind its 24% of online sports wagering.
Competition in the market has intensified since Paddy Power entered Australia in 2009 through its buy of Sportsbet. The Irish bookmaker has since increased its share of the online betting market from around 10% to 20% through the additional acquisition of horse-racing specialist International All Sports (IAS) and organic growth of the business, according to figures from the Australian Racing Handbook. Bet365 has taken the decision to build a presence in the market from scratch rather than entering by acquisition, recently establishing an office in Darwin in the Northern Territory, where most online bookmakers are licensed.
Sportingbet warned the London Stock Exchange this morning that current discussions may not result in a transaction for Australian Stock Exchange-listed Centrebet.
Sportingbet first entered the Australian market in 2001 with its buy of South East Asian-based Number One Betting Shop, later obtaining a licence in Australia’s Northern Territory.
Online in-play betting, poker and casino remain unregulated in Australia due to a ban on the offer of these products under the country’s Interactive Gambling Act 2001.
Analysts were broadly positive to news of the proposed acquisition, the majority issuing or reiterating buy recommendations for Sportingbet. Ivor Jones of Numis summed up analyst consensus with his view that “the deal would greatly improve the quality of Sportingbet's profits” by ramping up the operator's exposure to regulated markets. Sportingbet’s share price has recently been depressed by investor concern over the risk profile attached to the high share of its revenues deriving from unregulated dot.com markets such as Spain, Greece and Turkey.
With current net cash of around £25m on the balance sheet, Sportingbet would need to raise fresh equity to fund the buy, with Nick Batram of Peel Hunt stating that: “Given the regulatory backdrop an equity fund raising is unlikely to be straightforward", and Simon Davies of Collins Stewart adding that: "[A] £120m equity raising in a nervous market will be a challenge."
No comments:
Post a Comment