The Kindred Group, whose list of brands includes Unibet and 32Red, has this week been the subject of a £2.2 billion takeover bid from La Francaise Des Jeux (FDJ), the French National Lottery operator.
And so tantalising has that offer proven to be that the Scandinavian operator’s board of directors has recommended to shareholders to accept it when put to a vote in the weeks ahead.
The second half of 2023 and into 2024 has proven to be a quiet time for merger and acquisition activity in the gambling sector, as economic challenges and regulatory crosswinds have left many of the big players with a wait-and-see approach.
But the lure of better fiscal times ahead has convinced FDJ that now is the time to pull the trigger – and it could spell a raft of takeover activity ahead in 2024.
Moving On Up
It would be fair to say that 2023 was a tough year for the Kindred Group.
Below-par results meant that EPS predictions were missed in both March and September – effectively meaning that the firm was unable to meet its shareholder expectations.
Heads rolled, with Henrik Tjarnstrom one of the most high-profile members of the senior management team to resign, with up to 300 more people let go as the firm tightened its purse-strings.
In March, Kindred was hit with a £7.1 million fine from the UK Gambling Commission after two of its brands – 32Red and Platinum Gaming – were found to have failed to meet their social responsibility obligations.
A strategic review saw the company change focus, with a full removal from the lucrative North American market planned, and impose a tacit agreement that a merger or buy-out would be sought. According to industry speculation, the likes of Entain, 888 and a number of capital venture firms were approached to get a gauge of any interest, but none of them decided to come up with a concrete offer.
The takeover bid from FDJ is the first known interest to have been received, with shareholders now encouraged to accept the terms offered. It’s thought that five key groups – including Corvex Management and Eminence Capital – own around 28% of all the firm’s shares, and will have major influencing power on the final decision.
“I believe that combining with FDJ, Kindred can accelerate the delivery of long-term strategic projects, continue to grow in core markets, and provide a trusted source of entertainment to customers,” so said Kindred’s chief executive, Nils Andén. “It will also speed up our path towards 100 per cent locally regulated revenue.”
Better results in the final quarter of 2023 – revenue was up to £312 million, a 2% increase on the same period a year earlier, has at least sparked some positivity amongst Kindred’s invested parties and could yet see the takeover plot rejected.
The acceptance window will open late in February, before expiring in November if no decision has yet been made.
FDJ can lay claim to being the second largest lottery operator in Europe, running the games in their native France as well as in Ireland, where they acquired Premier Lotteries Ireland (PLI) in the second half of 2023 to take on exclusive running of the Irish draw until 2034.
The French government used to have a controlling interest in the firm, but that was reduced to 20% when FDJ went public in 2019 – since when they have begun to expand via a series of acquisitions.
Now, FDJ has made no secret of their desire to expand into the new gambling markets, with online sports betting and casino gaming thought to be high up on the list. To that end, they’ve already brought out ZEturf, one of France’s premier horse racing betting outlets.
The Kindred Group’s suite of brands would afford them a leg-up in the UK and across the continent while providing them the rights to the firm’s intellectual property – which would include the software upon which a handful of sportsbooks operate.
“In this market, Kindred is one of the leading operators, combining strong brands, best-in-class technology platforms, an attractive growth profile and a committed approach to responsible gaming,” said FDJ chair, Stéphane Pallez.
So there’s plenty of weight in the potential takeover for both parties, although of course there’s the potential for a rival bidder or two to enter the fray now that Kindred have made their receptive stance known publicly.