Entain seals Dutch market entry with BetCity acquisition

Entain has agreed to acquire the holding company of Dutch licensed operator BetCity in a cash-plus-earnings-related deal which could see the firm pay up to €850m (£729.2m).

Under the terms of the deal, Entain will pay an initial consideration of €300m (£257m) on completion, together with a “balancing payment” to be paid in early 2023, based on the performance of the BetCity brand in the 2022 financial year.

The initial €300m will be paid from Entain’s existing cash resources and from its revolving credit facility.

In 2024, Entain will make a further contingent payment based on 10x BetCity’s EBITDA for the financial year 2023, less any amounts already paid out to the firm.

In addition to these main payments, a final payment of €50m will be paid to BetCity based on the successful migration of the business to the Entain platform and the realisation of certain synergies arising from the deal. BetCity is currently powered by Kambi.

Entain has said the acquisition is expected to deliver cost synergies of approximately €28m, arising from technology, content and royalty benefits by the end of 2026.

The deal is expected to complete during the second half of 2022.

“This acquisition will create a strong market operator with significant growth opportunities, in line with the group’s strategy,” Entain said in a statement.

“The combination of BetCity’s local expertise, strong brand and large diverse user base, with Entain’s global scale and market-leading platform will provide customers with a broader offering of engaging products, fresh content and new experiences,” Entain added.

Indeed, Entain has suggested the BetCity brand is a “highly complementary” one to its bwin and Party brands (partypoker and PartyCasino), which are currently awaiting licences from the Dutch regulator, the KSA, with the operator in the process of providing required additional documentation to support these applications.

Entain CEO Jette Nygaard-Andersen highlighted “significant opportunities” arising from the recently regulated Dutch market.

“This acquisition will provide customers with an even better experience as we combine BetCity’s local expertise and brand alongside Entain’s market leading, customer-focused platform,” Nygaard-Andersen said.

“This transaction further underpins our growth strategy of operating in attractive regulated markets. We look forward to working with [CEO] Melvin [Bostelaar] and the BetCity team,” she added.

Headquartered in Amsterdam, BetCity was one of 10 operators to receive an online gambling licence from the Dutch Gambling Authority (KSA) in its initial tranche of licences awarded in October 2021.

According to estimates provided by Entain, BetCity achieved a 20% share of the Dutch market during the fourth quarter of 2021.

Following completion of the deal, Bostelaar and other key members of the leadership team will remain with the company.

Addressing the deal, Bostelaar noted the positives arising from combining with a “world-class group” in Entain.

“Together we will be well-placed to maintain a strong market position in the Dutch market for the coming years,” Bostelaar said.

“Entain’s market-leading platform, technology, established brands and global scale provides a fantastic opportunity to expand and enrich our customer offering.

“Both BetCity and Entain position the customer at the heart of everything we do, with Entain’s core values and philosophy in responsible gaming, compliance and company-culture seamlessly aligning with those of BetCity.

“We look forward to a bright future together,” he added.

Entain shares opened relatively flat, up just 0.9% to 1,354p.

Delivering its assessment of the deal, Regulus Partners suggested BetCity’s 20% share of the Dutch market in Q4 2021 was a “remarkable achievement” given the prior intent to make the business a sports-only brand in the heavily igaming slanted Dutch market.

“Selling now for such a price, only 9 months after launch, represents one of the most rapid returns on effort seen in the sector; it also demonstrates the extent of the market share disruption (rather than pure shrinkage) caused by the Netherlands black out period,” Regulus Partners analyst Paul Leyland said.

“With former market leader Kindred now getting licensed again (as well as Entain’s Bwin and Party brands), BetCity’s decision to hand its sudden “local hero” brand to a much larger operator makes considerable sense.

“The extent to which BetCity can hang on to its market size and share as the NL market evolves remains to be seen, with a platform migration adding risk. Nevertheless, the aquisition both supports and demonstrates the growing need for deep localisation to sustain growth, in our view,” Leyland added.