Recently emerging from a challenging fiscal year, global sports betting and gaming group Entain is reportedly considering a substantial selloff of several gaming interests. Wall Street advisory firm Moelis has been appointed to counsel on the prospective divestitures, as Entain navigates the choppy financial waters stemming from a net loss in 2023 amounting to £936.5m, a staggering figure unveiled in their annual earnings report on 7 March.
With an aggressive track record of acquisitions under scrutiny, the pressure is on for Entain to recalibrate its portfolio and streamline operations. The buyout of Poland’s STS in 2023, for instance, catalyzed notable discontent amongst its investors, leading to a backlash spearheaded by Eminence Capital.
Per insights from the Financial Times, the focus of the sales will likely be on entities that are not seamlessly integrated into Entain’s proprietary platform. These stand-alone assets presently contribute nearly one-third of the firm’s net gaming revenues, based on figures from the first half of the previous year.
Among the potential sales candidates are the Dutch operator BetCity, which joined the Entain roster in 2023 at a cost of £398mn, and an array of other holdings including Ladbrokes Australia, Baltic-centric Enlabs, and Georgia-based CrystalBet. By divesting these properties, Entain aims to consolidate its efforts on key markets such as the UK, along with reinforcing its stake in the US via its BetMGM venture, founded in 2018 through a partnership with MGM Resorts.
Entain’s approach of relentless mergers and acquisitions in the sports betting realm faced criticism throughout 2023, inciting doubt about the company’s strategic direction and precipitating the departure of CEO Jette Nygaard-Andersen.
An uptick of 11.1% in net gaming revenue did little to offset the financial blow dealt by a settlement with HM Revenue & Customs (HMRC). This settlement, which capped off at £585.0m, alongside a £20.0m charitable donation and a £10.0m cover of CPS and HMRC expenses, was factored into the losses reported for 2023.
In spite of these daunting figures, Entain’s chairman Barry Gibson exudes optimism regarding the company’s future growth trajectory. He articulates a narrative of transition that, although arduous, gears the company towards a more fortified revenue stream, a revitalized board, and a resolution to lingering regulatory issues.
A closer look at Entain’s 2023 fiscal snapshot reveals the online business segment’s customer base has surged by 23.0%, reaching unprecedented highs. The overarching financial outcome tallies with anticipations: UK operations accounted for £1.95bn in revenue, Italy accrued £517.4m, Australia and New Zealand together amassed £515.1m, with another £1.44bn from other European ventures, and £339.9m originating from various global engagements.
Entain’s joint venture with MGM Resorts International, BetMGM, also came into focus, albeit falling marginally short of the $2.00bn revenue mark for 2023. Entain’s 50% interest in BetMGM significantly contributes to its revenue figures, with the joint venture achieving a 14.0% market share in sports betting and igaming, and recording positive EBITDA in the latter half of the year for the first time.
However, the narrative took an unexpected twist when MGM elected to roll out BetMGM’s UK operations sans Entain, instead choosing LeoVegas as their partner for the venture. The subsequent August 2023 launch of the brand underscored a potential shift in alignment within the alliance.
Ultimately, with 2023 behind them, Entain appears to be pivoting strategically—shedding select assets to refocus on its core markets and fortify its partnership in the lucrative US market with BetMGM. This strategic restructuring heralds a pivotal phase as Entain strives to bounce back from financial setbacks and reassert its position as a powerhouse in the global gaming industry.
