Kambi Emerges as Possible Takeover Target

Posted on: May 4, 2023, 09:27h. 

Last updated on: May 5, 2023, 10:27h.

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

The sports wagering industry is awash in takeover rumors. Add Kambi Group Plc (OTC:KMBIF) to that list, according to one research firm.

Kambi takeover
A Kambi booth at an industry convention. The company is rumored to be a takeover target. (Image: Kambi)

The Sweden-based gaming technology provider could be an attractive buy for a variety of suitors, noted research firm Eilers & Krejcik Gaming (EKG) in the latest edition of the EKG Line report.

EKG observed that Kambi’s recent payment of a convertible issue to Kindred removes an overhang to a potential acquisition. But the analysts acknowledged that Kambi’s new share repurchase program could be a sign the company isn’t sitting idly by waiting for a buyer to come calling.

Last year, the Stockholm-listed company did away with a poison pill provision. Companies adopt poison pills in attempts to fend off unsolicited acquisition offers, essentially diluting the aspiring buyer by selling stock to other investors at below-market prices. With that provision gone, Kambi is an easier target for a buyer.

Add to that, analysts expect a flurry of mergers and acquisitions in the sports wagering space this year, with technology providers seen as valid sellers.

Prospective Buyers for Kambi

A variety of companies, including private equity firms and gaming operators, could make runs at Kambi.

Kambi checks a few core P/E boxes—including cash flow generation,” observed EKD. “Apollo Global Partners is looking for ways to monetize its Yahoo Sports asset via sports betting and Kambi could fit in as a platform. Kambi and Apollo have some existing links through Great Canadian (owned by Apollo, sportsbook powered by Kambi) and Wagr (owned by Apollo via Yahoo and has a front end technology deal with Kambi-owned Shape Games).”

Another company that could mull a purchase of Kambi is Bally’s (NYSE: BALY). Earlier this week, the regional casino operator and the Swedish firm announced a technology partnership. Additionally, Bally’s has a long history of acquisitions – some ill-fated – and the agreement between the two parties contains provisions that allow Bally’s to purchase Kambi source code in the future.

Due to its somewhat dubious acquisition track record and near-term need to conserve cash, Bally’s may be content to adhere to the terms of the tech agreement with Kambi. Likewise, Bally’s Sportsbook may not be able to generate the revenue needed to cover Kambi’s costs, according to EKG.

Far-Flung Idea

Acknowledging it’s not highly likely, EKG says there is something of a case for MGM Resorts International (NYSE: MGM) to potentially examine a Kambi buy.

The casino giant recently said it wants ownership of its sports wagering and iGaming technology. Currently, Entain handles that side of the BetMGM business, but there is an area where Kambi could make sense for MGM.

Kambi is already integrated with MGM’s LeoVegas platform, making it a potentially straightforward target, although again it might prompt B2B client losses,” concluded EKG.

With $4.5 billion in cash on its balance sheet as of March 31, MGM has the resources to make deals.