Kindred Group Plc has completed the purchase of 32Red Plc for around £175 million. The deal was announced on the 23rd of February, but has now gone through courtesy of Kindred getting hold of 97% of 32Red’s shares. It means that 32Red Plc will fully delist from the London Alternative Investment Market as it becomes part of the larger Kindred Group.
The governance of Kindred has informed that it has attributed the acquisition related costs, which are £4.6 million. Of that amount, £600,000 was already accounted for within the 2017 Q1 trading update. The rest of the costs, therefore, will be recognised in the upcoming statements that are released by the firm. The 32Red assets will immediately be added to the Kindred Group’s corporate metrics.
Kindred Contines to Expand
The move to buy 32Red sees the Kindred Group continue its expansion into the betting market. The Group is already responsible for the operation of the poker site Unibet, which is extremely popular with online poker players and the name of the company before it rebranded. Now the purchase of the British company hands them a betting site that is registered to opened in the United Kingdom and Italy, with a licence out of Gibraltar.
32Red is not just a sportsbook, boasting an operation that includes poker, bingo and an online casino. That helps to explain why the Kindred Group was willing to pay as much as 16% over the latest share price that was on the London Stock Exchange in order to ensure that the acquisition went through. The Chief Executive Officer of Kindred, Henrik Tjarnstrom, said the following about the purchase:
The acquisition of 32Red is consistent with our multi-brand strategy and stated desire to grow our business in locally regulated and soon to be regulated markets. 32Red is a high-quality, customer-focused business with a similar culture to Kindred Group’s and we are delighted to welcome 32Red and its team into the Kindred family and look forward to further developing the brand going forward.
It’s Another Deal in a Wave of Consolidations
The move from the Kindred Group to purchase a fellow online gambling company is the latest in a long line of similar such moves across the industry. Similar such mergers and acquisitions have taken place across the world of online gambling, with companies believing that additional scale will allow them to meet the likely burden of increased regulation and taxation in the coming years.
This is the first move that the Kindred Group has made along those lines since the 2015 purchase of the Stan James gambling business. The Group has long believed that 32Red would be an impressive purchase, with analysts saying that the move makes ‘strategic and financial sense’. David Jennings, an analyst at Davy Stockbrokers, said that ‘further consolidation in the gaming space’ is to be expected.
32Red was founded in 2002 and is based in Gibraltar. The gaming company is based online and operates numerous different factions of betting, which appeals to the Kindred Group’s desire to have a ‘multi-brand’ strategy moving forward. Indeed, the company it is buying has all of the following brands in its Arsenal at present:
- 32Red Sportsbook
- 32Red Poker
- 32Red Bingo
- Roxy Palace Online Casino
Given that the company is licensed and regulated in Gibraltar and has operations in Italy and the United Kingdom, it makes perfect sense for the Kindred Group to want to add it to its roster. The numbers stack up, too. In the financial year that ended on the thirty-first of December 2015, 32Red’s Net Gaming Revenue was £48.7 million, with the EBITDA coming in at £5.2 million.
At the same point in 2016, the Net Gaming Revenues had increased to £62.3 million, demonstrating that it was a company heading in the right direction. The 32Red directors consider the offer that they’ve been presented with to be fair and reasonable, suggesting that it’s a good deal for both parties. The company’s Chief Executive Officer, Ed Ware, said that they has ‘consistently and profitably grown 32Red’s market share.’
The UKGC Has Approved
The offer made by the Kindred Group for the purchase of 32Red was actually accepted in April by the majority shareholders, also being granted approval by Gibraltar’s Licensing Authority. The deal couldn’t be officially completed, however, until the United Kingdom Gambling Commission had given its seal of approval. The cash offer of £175.6 million was upgraded to ‘unconditional’ in April.
Now it appears as though the UKGC has completed its review process, giving the deal the go-ahead. The Kindred Group was confident that exactly that outcome would be achieved, expecting the governing body of gambling in the United Kingdom to agree with the ‘wholly unconditional’ nature of the offer. The Group was right to be so confident and the acquisition will now go ahead as a result, strengthening the Kindred Group’s hand in the industry.