Flutter Entertainment has agreed to acquire omnichannel operator Snaitech from Playtech for a cash consideration of €2.3bn.
The global gambling operator has stated that the acquisition fully aligns with its strategy to “invest in leadership positions in international markets”, while Playtech has described the valuation of Snaitech as “attractive”.
Flutter anticipates the transaction to close by the second quarter of 2025 and it is expected to be immediately accretive to earnings per share.
Flutter eyes top spot in Italy
Snai is one of the top three online operators in Italy with a 9.9% market share and has the number two position in retail share in both betting at 19% and gaming at 14%. In the financial year 2023, Snai generated revenue of €947m and adjusted EBITDA of €256m, of which 50% was generated online.
Flutter expects to assume “the gold medal position” in the country once the deal is completed, with around 30% online share when combined with its existing Italian business.
Sisal, the company’s existing Italian brand, has seen growth across AMPs and revenue at a compound rate of 27% and 17% respectively between Q2 2022 and Q2 2024, resulting in 270bps online share gain. Flutter credits this performance to strong local execution alongside the benefits of Flutter Edge, which it expects to replicate with Snai.
This also isn’t the only acquisition Flutter has announced recently, as last week, the group reported acquiring an initial 56% stake in NSX Group, a Brazilian operator whose brands include Betnacional, to create a new business in the region called Flutter Brazil.
“I am delighted to announce the acquisition of Snai, one of the leading players in Italy, Europe’s largest regulated market,” commented Peter Jackson, CEO of Flutter Entertainment.
“This transaction is compelling strategically and financially. It fits perfectly within our strategy for value-creating M&A and creates a significant opportunity to accelerate Snai’s growth by providing them with access to Flutter’s market-leading products and capabilities both in the US and globally.
“I look forward to welcoming the Snai team to the Flutter Group and working with them to maximise the growth opportunity for our combined businesses.”
Online growth possibilities
Flutter outlined three areas in which the acquisition of Snaitech will create shareholder value:
- Delivering an enhanced competitive position in a fast-growing, regulated market
- Enhancing its “local hero” brand portfolio
- Opportunities to drive both cost and revenue synergies through access to the Flutter Edge, and deliver meaningful value creation
Regarding delivering an enhanced competitive position in the Italian market, Flutter noted that while online penetration is only at 21% of the market’s €21bn GGR in 2023 in comparison to more mature markets, “greater digital adoption is expected to drive online market growth at a compound rate of approximately 10% over the next three years”.
The group also highlighted that local advertising restrictions and the prevalence of online deposits/withdrawals via retail outlets provide “omni-channel operators with an opportunity to maximise growth”.
As for enhancing the “local hero” brand portfolio, Flutter spotlighted Snai’s retail presence as the “third most recognised brand in a market with restricted advertising”, stating that it compliments its Sisal brand.
The company stated: “We will continue to run a multi-brand strategy in the market Snai’s customers who utilise both online and retail channels are more loyal, more active and generate more revenue per player than online-only players.
“This increasingly diversified retail footprint will give Flutter access to increased omni-channel customer acquisition opportunities to capitalise on online growth.”
Regarding Flutter Edge-powered synergies and value creation, the group expects the transaction to generate “at least €70m” in operating cost synergies through the integration of technology, content and third-party procurement, along with incremental revenue synergies.
This is expected to be achieved three years post-transaction completion – 10% in year one and 50% in year two – with a cost of 1.25x.
“It fits perfectly within our strategy for value-creating M&A and creates a significant opportunity to accelerate Snai’s growth by providing them with access to Flutter’s market-leading products and capabilities both in the US and globally.”
Peter Jackson, CEO of Flutter Entertainment
Flutter noted that revenue synergies will be accomplished by giving Flutter Edge access to Snai, across “pricing and risk management, in-house casino content and leveraging Flutter technology platforms, materially enhancing the customer experience for Snai customers”.
On a post-cost synergy basis, Flutter expects the transaction to be at a similarly attractive multiple to the Sisal transaction, as well as being “comfortably above” its internal returns criteria by year two.
“Flutter has consistently delivered material revenue synergies to acquired businesses as demonstrated by the compound revenue growth rates of 17% and 19% for Sisal and tombola respectively between Q2 2022 and Q2 2024.”
In addition, the group stated that capital expenditure synergies are expected to be €10m. Subject to merger control clearance and other customary regulatory clearances, the transaction is expected to close by Q2 2025.
Flutter added that the transaction is consistent with its strategy and an example of it continuing to allocate capital towards driving shareholder value creation.
Following the completion of the deal, the company expects its leverage ratio – 2.6x as of 30 June 2024 with $5.5bn in net debt – to “increase but then reduce rapidly given the highly visible profitable growth opportunities that exist across the Group”.
It also stated that it remains committed to its medium-term leverage ratio of 2.0-2.5x, which “allows flexibility” for the pursuit of value-creating acquisitions.
Flutter will provide additional details of the acquisition during its upcoming Investor Day on 25 September, where it expects to talk about the potential of medium-term organic growth and cash generation, as well as possible capital allocation opportunities.
Unlocking capital for Playtech
As for Playtech, the provider stated that following the transaction’s completion, it will be focusing on its “technology-led offering in high-growth B2B gambling markets with an accelerated growth plan and an extensive portfolio of strategic ventures”.
In addition, the transaction has been described as unlocking “significant capital” and is in line with the board’s stated strategy to maximise value for shareholders.
Once practicable to do so following the transaction’s completion, Playtech intends to return €1.7bn to €1.8bn to shareholders, with the final amount to be determined with reference to the ongoing business’ capital needs.
In addition, the company will repay amounts outstanding on its bond of €350m due March 2026, “significantly strengthening” its balance sheet.
Playtech sale of Snaitech to Flutter follows the company’s recent announcement that it had amended its strategic agreement with Caliente’s Caliplay, resulting in the company receiving over €150m in unpaid software and service fees with plans in place to dismiss its legal proceedings once the revised arrangements come into effect.
Mor Weizer, CEO at Playtech, added: “Under the Playtech Group’s ownership, Snaitech has grown into a high-quality business with a leading position in the Italian sports betting and gaming market. The business has an experienced and high-performing management team that has fully embraced the post-lockdown shift to omni-channel in Italy.
“Today, Snaitech has an established retail presence and online business that are both well-placed to continue their success in one of the most attractive markets in Europe.
“While Snaitech has been an important part of the Playtech Group’s growth in recent years, the Board agreed that this transaction represents a compelling opportunity to maximise value for our shareholders while also allowing them to share in further upside from continued ownership of a leading B2B business.
Weizer continued: “The combination of the Playtech Group’s leading technology with its exposure to attractive markets, including in the Americas and Europe, provides a strong platform for growth in the medium-term. We are excited about what the future holds and the many opportunities ahead of us.
“In Flutter, Snaitech will have a new owner with an existing presence in Italy and all of the opportunities that brings. I’m confident that Snaitech will continue to excel under their ownership.”
