Hedge fund outlines six potential US bidders for Kambi

A hedge fund management company in Norway has suggested that as many as six US and US-facing operators could potentially table bids to acquire sports betting technology supplier Kambi.

Oslo-based Alinea Capital Management, which holds a share position in Kambi, made the claims as part of a series of tweets on Friday.

Identified candidates include sportswear retailer Fanatics, which has been consistently linked with potential M&A as a springboard into sports betting, and the Walt Disney Company, which has ambitions to make its own splash in the sportsbook world through its ESPN brand.

Fanatics recent trademarking of the “BETFANATICS” name with the US Patent and Trademarks office, was referenced by Alinea as a potential catalyst for its entry into a bidding war for the supplier’s technology.

There were rumours that suggested Fanatics had previously signed a deal to acquire technology from Amelco, however these reports have not been confirmed.

In the case of Disney, Alinea highlighted the aforementioned ESPN talk, which began in November when Disney CEO Bob Chapek noted the global giant was out to “aggressively pursue” a sportsbook opportunity.

Other major candidates linked by Alinea to Kambi include MGM Resorts International as well as Las Vegas Sands, which launched its own igaming investment division in July 2021 with the aim of increasing its foothold in the sector.

MGM’s global ambitions, catalysed in its $607m offer for LeoVegas, were suggested as a marker for potential sportsbook interest, however, any potential deal could also be augmentative to the BetMGM brand, which MGM operates with Entain.

If Kambi plays a part of Leo’s expansion plan, we believe it would make sense for MGM to buy Kambi, to not jeapordize it being acquired by someone else. We do also see the neg. scenario where MGM makes another bid for Entain, and potentially migrates Leo to Entain’s sportsbook.

— Alinea Capital Management AS (@AlineaCapital) May 27, 2022

Australia-headquartered supplier Aristocrat, which ultimately lost out in its efforts to acquire Playtech in February, recently outlined its ambition to gain a US market share within five years, potentially through sports betting, was also linked.

Sports betting data giants Sportradar and Genius Sports were also suggested by Alinea as suitors, with a private equity-backed bid also among the runners and riders listed by the hedge fund.

The Alinea speculation follows similar claims made by Eilers & Krejcik Gaming (E&KG) last week, with the analyst firm lauding Las Vegas Sands’ potential as a Kambi suitor along with a similar list of operators to that postulated by Alinea.

Here’s the take on possible $KAMBI suitors from @CKrafcik, @akrejcik and the @EilersKrejcik team.

Sign up for the EKG Line newsletter here:https://t.co/vDHUZXF8rF pic.twitter.com/VGrhvm3zi9

— Chris Grove (@OPReport) May 26, 2022

One other potential participant in the Kambi bidding war suggested by E&KG is FTX, which declined to follow up on a deal to acquire Play Up USA last year, after alleged meddling in the transaction by then Play Up USA CEO Dr Laila Mintas.

““The crypto exchange’s interest in acquiring US online sports betting assets is well known (see, for example, its failed bid for PlayUp). Kambi would get FTX a core piece of the online sports betting puzzle, though a FTX-Kambi combination would hardly be turnkey for FTX in the US market, as it would lack online sports betting market access,” E&KG concluded.

A central catalyst for the claims made by Alinea and Eilers & Krejcik is the removal of a convertible bond by former parent company Kindred Group in February.

The $8.5m bond, signed as part of its spinoff of the Kambi brand in 2014, could have been converted to shares by Kindred Group, and those shares could then be used to torpedo any potential sale of the Kambi business to a third party.

The strategy, known widely as a ‘poison pill’, is a defence tactic utilised by a target company to prevent or discourage attempts of a hostile takeover. Reacting to the sale, Kambi suggested it gave “complete control” over the company’s strategic direction.

Kambi has recently also proposed measures aimed at increasing its financial flexibility, including share repurchases to prepare the company for potential Kambi-led M&A activity.

Speculation around an impending offer for Kambi has intensified of late as its share price seems to defy the downward trend across the sector.

While the supplier’s stock has lost almost half its value in the past 12months, it is up 37% in the past month at SEK217.