Gamesys shareholders eye jackpot as Bally launches bid

Russ Mould
24 March 2021

“Gamesys has come a long way since its switch to the London Stock Exchange from Toronto in 2017 and the gaming services company may be about the enter the next stage of its development as part of American firm Bally. The racetrack and casino has launched an all-cash bid for Gamesys, although investors do have the option to take shares in Bally if they prefer,” says Russ Mould, AJ Bell Investment Director. “This is the latest swoop for a British gaming specialist by an American one, after Caesar’s successful lunge for William Hill and MGM Resorts’ unsuccessful one for Entain. It does make you wonder whether MGM Resorts will spin the wheel again, while shares in 888 are up in sympathy with those of Gamesys.

 
Source: Refinitiv data

“FTSE 250 member Gamesys changed its name from Jackpotjoy to JPJ and then in 2019 it purchased the platform software provider that now gives the firm its name along the way. 

“That deal has already begun to nicely pay its way, judging by the full-year results that Gamesys released earlier this month (9 March). On an underlying basis, sales rose 29%, underlying net income rose 86% and free cash flow was excellent – so good, in fact, the Gamesys paid maiden dividends for fiscal 2020 and raised of prospect of higher shareholder distributions and even share buybacks in 2021.

“The company’s strong free cash flow, relatively lowly valuation and platform technology expertise will have all caught the eye of Bally, which will be looking to make the most of the deregulation of betting in America.

“In 2018, the US repealed 1992’s Professional and Amateur Sports Protection Act to effectively legalise betting on sports beyond the borders of Nevada by giving individual states the ability to tax and regulate this activity themselves.

“Following the November 2020 Presidential election in the USA, when some states also held ballots on the legalisation of gambling at the same time, 29 states have legalised or introduction legislation to legalise sports betting and only three – Idaho, Wisconsin and Utah – have done nothing at all on the topic.

“The rise of sports betting, online or otherwise, in the USA could be a boon for cash-strapped states who are struggling to cope with the economic shock inflicted upon them by the pandemic. Some states charge hefty initial licensing fees and all will look to pocket taxes as a percentage of gross gaming revenue for good measure, meaning that states, companies and investors alike could all potentially benefit.

“Bally will be looking to use Gamesys’ technology to leverage its existing footprint, which extends to casinos in seven states and Arapahoe Park racecourse in Colorado. 

“Gamesys may be best known in the UK for its Vera and John online bingo games, as well as Intercasino and Rainbow Riches.

“If the deal closes – and Gamesys’ shares have surged to a premium relative to the offer price – then this would be latest action in a market that has been in a frenzy since the American regulatory changes, as leading players have jostled for position in what could be a betting boom Stateside, just as other markets, including the UK, Sweden, Germany, the Netherlands and Australia, all tighten their rules.”

APPENDIX: BRITISH BOOKMAKING: MAJOR EVENTS TIMELINE

2000
Bet365 begins trading
Betfair begins trading
Betandwin floats on the Vienna stock exchange, three years after its launch

2001 
SkyBet begins trading

2002 
William Hill floats on the London Stock Exchange
888 Holdings is established

2003
Candover-Cinven private equity consortium buys Gala

2004 
GVC lists on London’s AIM market
Done Bookmakers renames itself Betfred

2005 
Gala buys Coral-Eurobet 
William Hill buys Stanley Leisure
PartyGaming floats on the London Stock Exchange, eight years after its launch

2006 
Betandwin changes its name to bwin

2007
Stan James acquires Betdirect from 32Red

2008
Stan James acquires Betterbet

2010
Betfair floats on the London Stock Exchange

2011
Betfred buys the Tote (and a seven-year exclusive licence for pool betting)
William Hill buys American Wagering and two other US businesses
Bwin Interactive mergers with PartyGaming

2012
Rank acquires Gala Coral’s casinos
William Hill and GVC jointly acquire and break up Sportingbet

2014
BetVictor is acquired by Michael Tabor
Sky sells a stake in SkyBet to CVC

2015
Unibet (Kindred) buys Stan James’ online business
William Hill makes an unsuccessful bid for 888

2016
Ladbrokes mergers with Gala-Coral to form Ladbrokes-Coral
Paddy Power merges with Betfair
GVC acquires bwin.party
888 and Rank make a failed bid for William Hill
Amaya makes a failed bid for William Hill

2017
Kindred acquired 32Red

2018
GVC acquires Ladbrokes-Coral
GVC acquires CrystalBet
Stars Group acquires SkyBet
Paddy Power Betfair acquires Fan Duel
Stars Group acquires William Hill Australia

2019
William Hill acquires Mr Green
888 acquires Betbright
Boylesports acquires Wilf Gilbert
Flutter Entertainment (Paddy Power Betfair, as was) acquires Adjarabet
Flutter Entertainment (Paddy Power Betfair, as was) acquires Stars Group

2020
Boylesports acquires William Hill’s Northern Irish shops
William Hill receives separate bids from Apollo Management and Caesar’s Entertainment. Caesar’s prevails and William Hill is due to delist in spring 2021

2021
Entain received bid from MGM Resorts, which it rejects
Gamesys agrees in principle to acquisition by Bally Corporation

Russ Mould
Investment Director

Russ Mould’s long experience of the capital markets began in 1991 when he became a Fund Manager at a leading provider of life insurance, pensions and asset management services. In 1993 he joined a prestigious investment bank, working as an Equity Analyst covering the technology sector for 12 years. Russ eventually joined Shares magazine in November 2005 as Technology Correspondent and became Editor of the magazine in July 2008. Following the acquisition of Shares' parent company, MSM Media, by AJ Bell Group, he was appointed as AJ Bell’s Investment Director in summer 2013.

Contact details

Mobile: 07710 356 331
Email: russ.mould@ajbell.co.uk

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