Caesars Could Bid for Flutter Following UK Whitepaper Release

Posted on: March 8, 2023, 04:35h. 

Last updated on: March 10, 2023, 02:20h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The upcoming release of the UK Gambling Commission’s (UKGC) widely anticipated white paper could stoke a fresh round of consolidation activity in the industry. UK-based firms, including behemoth Flutter Entertainment (OTC: PDYPY), could be potential targets.

Caesars Entertainment
Caesars Palace Las Vegas. A research firm says the operator could make an acquisition offer for FanDuel, or its parent, Flutter Entertainment. (Image: Caesars Entertainment)

A new report by data provider CTFN indicates that industry observers believe share price downside attributable to the whitepaper — which is believed to be coming out later this month — is already priced into UK-based gaming companies. And with the regulatory framework unlikely to be as punitive as previously speculated, there’s optimism that firms such as Flutter could become takeover targets.

The research firm suggests that following the publication of the white paper, Caesars Entertainment (NASDAQ: CZR) could purchase FanDuel for a “hefty” premium or potentially move on the entirety of Flutter Entertainment. Flutter owns 95% of FanDuel– the largest online sportsbook operator in the US.

Such a transaction would difficult for Caesars to digest. FanDuel alone would likely command a price tag double that of DraftKings’ (NASDAQ: DKNG) current market capitalization of $8.53 billion. Call it $17 billion, and Caesars, worth $10.88 billion, would have to likely sell assets, debt, and perhaps equity to afford FanDuel. That would run counter to the casino giant’s efforts to reduce its debt burden. Plus, there’s the matter of Boyd Gaming’s (NYSE: BYD) 5% stake in FanDuel, how willing that company is to part with it, and how open Caesars is to paying a premium to a direct rival for it.

As for acquiring Flutter outright, that doesn’t seem plausible for Caesars because the Paddy Power owner’s market value is nearly $30 billion, and its collection of international assets may not be attractive to a gaming company that’s intensely focused on the US, as is the case with the Harrah’s operator.

MGM Could Revisit Entain Bid, Too

In a January note, CTFN observed that the release of the white paper could compel MGM Resorts International (NYSE: MGM) to revisit a takeover of Entain Plc (OTC: GMVHY).

Just a few weeks later, MGM CEO Bill Hornbuckle said his company would not be looking to acquire its partner in the BetMGM business. Still, CTFN suggests that the new guidance from the UKGC could “materially” change Entain’s outlook, potentially bringing MGM back to the bargaining table.

It is believed that MGM could be a suitor as iGaming and sports betting consolidation intensifies. Still, the conventional wisdom is that the casino operator would buy Entain out of BetMGM — not acquire the Ladbrokes owner outright.

Should another suitor call for Entain, MGM would have to approve that deal, particularly if the buyer has US operations competing with BetMGM.

888 Holdings Could Be Target, Too

CTFN added that 888 Holdings (OTC: EIHDF) could also be a takeover target, though the research firm doesn’t mention potential suitors.

888 shares are currently depressed in anticipation of the white paper and because of the recent departure of former CEO Itai Pazner amid an internal anti-money laundering probe.

The company has previously been mentioned as an acquisition candidate. But its scant US footprint could limit the pool of prospective buyers. Caesars is unlikely to be part of that group. That’s because in 2022, it sold William Hill’s international business to 888.