France’s state-owned lottery and betting company FDJ has made a $2.56 billion bid to acquire online gambling company Kindred Group, the two companies announced Sunday. The deal, if approved by regulators, would significantly expand FDJ’s online presence and reach across Europe and in the growing U.S. sports betting market.
Key Details of Buyout Bid
- FDJ has offered $10.50 per share for Stockholm-based Kindred, a 51% premium over its closing share price on Friday
- The deal values Kindred’s equity at $2.56 billion
- Kindred’s board has unanimously recommended that shareholders accept the offer
- The deal requires approval from competition regulators in multiple countries
- FDJ says it expects the deal to close in Q3 2024 if approved
FDJ said acquiring Kindred will help it grow rapidly in online sports betting and gambling, where Kindred has an established European brand and expertise.
“FDJ would benefit from Kindred’s product capabilities, expertise and experience which would allow FDJ to significantly accelerate its development in the fast growing online sports betting and gambling markets,” the company said.
Background of the Two Companies
Française des Jeux (FDJ) is France’s state lottery and sports betting monopoly. It offers lottery games, scratch cards, sports betting and horse race wagering through a network of over 30,000 physical point-of-sale outlets across France.
In 2019, FDJ had €1.9 billion ($2.1 billion) in revenue, on which it booked €202 million in net profit. About 16% of its sales currently come from online channels. FDJ employs over 2,200 people.
The French government has gradually privatized FDJ over the past decade while retaining significant control. The government took FDJ public in 2019 via an IPO while retaining a 21.9% stake.
Kindred Group operates various online gambling brands across Europe, including Unibet, StanJames and 32Red. The company focuses on online sports betting, casino games and poker.
Kindred has 17 million customers worldwide. It holds online gambling licenses in 10 European countries and in over 20 U.S. states.
In 2021, Kindred generated £1.3 billion ($1.6 billion) in gross winnings revenue on which it earned £108 million ($134 million) in operating profit. The company employs about 1,600 people.
| Key Stats: FDJ vs Kindred | FDJ | Kindred |
|---|---|---|
| 2021 Revenue | $2.1 billion | $1.6 billion |
| Online Revenue Percentage | 16% | 100% |
| Operating Profit | $202 million | $134 million |
| Employees | 2,200 | 1,600 |
| Headquarters | France | Sweden |
Strategic Rationale Behind the Deal
The deal appears to make strategic sense for both companies.
For FDJ, acquiring Kindred gives it an immediate foothold in 10 European online gambling markets where it currently has no presence.
Just as importantly, FDJ would gain technology, marketing expertise and experience in operating online gambling from a company that has been online-only since its founding in 1997.
FDJ highlighted Kindred’s product capabilities and online gambling expertise as one of the main assets it was after. FDJ’s experience remains centered around retail gambling even after it’s 2019 IPO.
Meanwhile, Kindred lacks a strong brand and distribution network in France, Europe’s second largest gambling market behind only the U.K.
FDJ’s ubiquitous brand presence and 30,000 point of sale locations could significantly strengthen Kindred’s business in France.
The deal is also timely ahead of the opening of new online gambling markets.
Outlook and Approval Timeline
If approved, the deal would create one of the largest online gambling firms in Europe. The combined company would also be poised to capitalize on the opening of new markets like the Netherlands in 2025.
However Bloomberg notes the multiple country regulatory approvals pose a significant hurdle. FDJ itself acknowledges the approvals may not come until Q3 2024 due to the complex cross-border nature of the deal.
Competition scrutiny is also expected to be high given the potential impact on consumers in Europe’s $104 billion online gambling market.
Nonetheless, analysts see regulators ultimately approving the bid but with potential stipulations around protecting consumer choice.
“There is a clear industrial logic to the deal. With the companies having broadly complementary geographical profiles, overlaps likely limited,” said Bloomberg Intelligence analyst Brian Egger. “Regulatory oversight will still be substantial given the deal’s size.”
Assuming approvals, FDJ says it intends to retain Kindred’s headquarters and senior management team in Stockholm under a new combined online gambling division.
FDJ stock rose 6.6% on the news to 52-week highs, indicating investors see strong long-term benefits. Kindred shares rose over 46%.
The deal marks the latest in a wave of M&A in Europe’s fast-consolidating gambling market. Potential remaining targets include 888 Holdings, Rank Group and Entain according to Bloomberg analysts.
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