Flutter stakes its claim for a bigger slice of the American betting pie

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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.

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 price change (%) PE (x) 2019E EPS Growth 2019E EPS Growth 2020E Dividend yield 2019E Dividend cover 2019E
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 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, Ladbrokes 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.

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

These articles are for information purposes only and are not a personal recommendation or advice.


russmould's picture
Written by:
Russ Mould

Russ Mould has 28 years' experience of the capital markets. He started at Scottish Equitable in 1991 as a fund manager and in 1993 he joined SG Warburg, now part of UBS investment bank, where he worked as equity analyst covering the technology sector for 12 years. Russ joined Shares in November 2005 as technology correspondent and became Editor of the magazine in July 2008. Following the acquisition of Shares' parent company, MSM Media by AJ Bell Group, he was appointed AJ Bell’s Investment Director in summer 2013.