Flutter Entertainment (Nyse: Flut; Lse: Fltr) (“Flutter”) the world's leading online sports betting and iGaming operator today announces that it has agreed to acquire Snaitech S.p.A. (“Snai”), one of Italy’s leading omni-channel operators, from a subsidiary of Playtech plc, for cash consideration based on an enterprise value of €2.3b.
The acquisition fully aligns with Flutter’s strategy to invest in leadership positions in international markets. We expect the transaction to close by Q2 2025 and it is expected to be immediately accretive to earnings per share.
Snai is the number three online operator in the Italian market with a 9.9% share in 2023 and 291,000 average monthly players. Online revenue and Adjusted Ebitda have grown at a compound rate of 26% and 32% respectively, in the four fiscal years to 2023. This is supported by a strong retail presence with over 2,000 sites driving a number two retail share position in both betting of 19% and gaming of 14%. Snai generated 100% regulated revenue of €947m (which is after the deduction of gaming duties) and Adjusted Ebitda of €256m in financial year 2023, of which 50% was generated online.
On completion, Flutter will assume the gold medal position in Italy with a ~30% online share when combined with its existing Italian business, which will deliver efficiency benefits in a key market for the Group. This includes Sisal, which, grew AMPs, and revenue at a compound rate of 27% and 17% respectively between Q2 2022 and Q2 2024, resulting in 270bps online share gain. This excellent performance reflects strong local execution combined with the benefits of the Flutter Edge, an effective combination we expect to repeat with Snai. The transaction is expected to deliver operating cost synergies of at least €70m along with incremental revenue synergies. On a post cost synergy basis, the transaction is at a similarly attractive multiple to the Sisal transaction. It is also comfortably above our internal returns criteria by year two.
The transaction is expected to create shareholder value as follows:
1. Delivers an enhanced competitive position in a fast growing, regulated market:
• Italy is the largest gambling market in Europe with an estimated gross gaming revenue (“GGR”) of €21bn in 2023.
• Online penetration remains low, at 21% of market GGR in 2023, compared to more mature markets like the UK and Australia where rates exceed 60%. Greater digital adoption is expected to drive online market growth at a compound rate of approximately 10% over the
next three years.
• Local advertising restrictions and the prevalence of online deposits/withdrawals via retail outlets provide omni-channel operators with an opportunity to maximise growth.
2. Enhances our “local hero” brand portfolio:
• Snai’s strong retail presence facilitates high brand awareness of 74%, the third most recognized brand in a market with restricted advertising. This complements Sisal, as the most recognized brand, and we will continue to run a multi-brand strategy in the market.
• Snai’s customers who utilize 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 capitalize on online growth.
3. Presents a compelling opportunity to drive both cost and revenue synergies through access to the Flutter Edge, and deliver meaningful value creation:
• Operating cost synergies expected to be at least €70m through integration of technology,
content and third-party procurement. The synergies are expected to be achieved in the three years post completion of the transaction with 10% achieved in year one and 50% in year two. The cost to achieve these synergies is expected to be 1.25x.
• Revenue synergies will be achieved by providing Snai with access to Flutter Edge capabilities across pricing and risk management, in-house casino content and leveraging Flutter technology platforms, materially enhancing the customer experience for Snai customers.
• 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.
• Capital expenditure synergies expected to be €10m The transaction is subject to merger control clearance and other customary regulatory clearances and is expected to close by Q2 2025.
The transaction is consistent with our strategy and is another example of Flutter allocating capital to drive shareholder value creation. At June 30, 2024, Flutter’s leverage ratio was 2.6x with $5.5bn of net debt. Following completion of the transaction by Q2 2025, we expect leverage to increase but then reduce rapidly given the highly visible profitable growth opportunities that exist across the Group. We remain committed to our medium-term leverage ratio of 2.0-2.5x, which allows flexibility for us to pursue value-creating acquisitions such as Snai.
We will provide a further update at our Investor Day on September 25, where we expect to discuss Flutter’s exciting organic growth and cash generation potential in the medium-term and the capital allocation opportunities that this will unlock.
Peter Jackson, Ceo, commented: “I am delighted to announce the acquisition of Snai, one of the leading players in Italy, Europe’s largest regulated market. 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 maximize the growth opportunity for our combined businesses.”