Kambi Could Be Takeover Target After Ditching Poison Pill

Posted on: February 12, 2022, 03:57h. 

Last updated on: February 12, 2022, 06:05h.

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

Takeover speculation is swirling around Kambi Group Plc (OTC:KMBIF). That’s after the sports betting platform provider ditched a poison pill provision hindering its ability to be acquired.

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

Kambi said last week it satisfied the terms of a $8.5 million convertible bond agreement reached when Kindred spun the technology company off in 2014. It announced that while certifying its partnership with Swedish sportsbook operator Kindred — its former parent company — is extended through 2026,

Convertible bonds are debt that can be converted into equity of the issuing company, meaning Kindred wielded control over Kambi to the extent that it could have stood in the way of a suitor looking to make a deal. That hurdle is a thing of the past.

Kambi now has the option to prepay the full loan amount and exit the bond agreement at any time of its own discretion,” according to a statement issued by Stockholm-listed Kambi. “Upon the prepayment of the convertible bond, Kambi will no longer be required to seek prior consent for certain events and will eliminate the prospect of Kindred converting the bond into shares, which would have given the operator a controlling influence over Kambi.”

The Malta-based company and its investors now have full control of its future direction, which could include positioning itself for a takeover.

Plenty of Suitors Could Line Up for Kambi

Less than two months into 2022, the gaming industry is already a hotbed of takeover offers and related rumors.

With more sportsbook operators seeking both vertical integration and to minimize, they’re bringing tech stacks in house — something that’s often easier to accomplish via acquisition. That’s already affected Kambi, as it previously lost DraftKings (NASDAQ:DKNG) as a client and is likely to encounter a similar result with Penn National Gaming (NASDAQ:PENN).

Even with lost business, Kambi’s technology is valuable to would-be buyers and the list of potential suitors includes well-known names.

“Kambi has long made sense as an acquisition target for B2C operators looking to bring technology in-house,” wrote RoundHill Investments co-founder Will Hershey in the firm’s weekend newsletter. “Now that Kindred’s poison pill has been addressed, this becomes a very real possibility. In terms of potential acquirers, I believe that Penn, Fanatics, and Rush Street all could be in the running for various strategic reasons.”

Kambi sports an enterprise value of $831 million as of Feb. 11 — an easily digestible figure for any number of suitors.

Bidder May Have Already Emerged

Due to Kambi calling the aforementioned convertible bond and landing a new three-year accord with Kindred two years in advance of the current agreement expiring, there’s speculation that Kambi may already be holding talks with an unidentified bidder.

While that’s unconfirmed, the logic makes sense, because there was no reason for Kindred to sign off on new pact with two years remaining on the current one.

Kambi clients include ATG, Churchill Downs Incorporated, Kindred Group, LeoVegas, Penn National Gaming, and Rush Street Interactive, according to the company.