In the wake of the announcement that Entain is in the process of conducting a comprehensive review of all its brands, speculation is rife that both Ladbrokes and Coral, two of the most prominent names in the global betting industry, could be listed for sale imminently.?

Entain’s sale of Ladbrokes and Coral could dramatically transform the betting industry’s dynamics.

The review was initiated following a challenging year for the company, which saw Entain swing in a significant loss of ￡878 million

The financial loss was primarily due to a number of exceptional circumstances, the most significant being a settlement tied to a protracted bribery incident. This case involved a Turkish subsidiary that has since been shut down and also implicated executives who are no longer in Entain’s employment. Despite these challenges, Entain’s core profits remained strong, escalating to ￡1 billion. However, the enforcement of new safer gambling regulations in the UK, which Entain adopted earlier than many of its competitors, somewhat dampened these profits.

Entain’s evaluation is still in its preliminary phase and encompasses all of Entain’s holdings. This implies that even though major brands like Ladbrokes and Coral could potentially be on the selling block soon, the company may well adopt a strategy of divesting its portfolio by selling off its lesser known brands such as PartyPoker.

Implications for the industry

Although Entain’s strategic review is designed to boost shareholder returns, the move has fuelled a flurry of speculation among industry experts and market observers that these renowned brands may soon be on the auction block.

This prospective offloading is unfolding during a period of substantial evolution in the betting industry, driven by shifts in regulation, advancements in technology, and changing customer tastes. A potential change in ownership of Ladbrokes and Coral could dramatically reshape the competitive dynamics, and bring in a new era of opportunities and hurdles for all market participants and stakeholders.

Entain’s deputy CEO and Chief Financial Officer Rob Wood, has expressed optimism. He believes that the company will be able to draw in more customers once its smaller competitors are obliged to adopt the same regulatory reforms.

For example regulatory reforms in Germany and the Netherlands also had a negative impact on all of the gambling sector’s profits. Entain, challenges and market struggles in Germany and the Netherlands, experienced a 5.2 percent decline in its shares, marking a 44 percent decrease over the previous year. However, Wood acknowledged that this would likely lead to increased marketing expenditure in the short term. 

Background and FY23 results

The company has been operating without a permanent CEO since December when Jette Nygaard-Andersen resigned. Looking forward, Entain is anticipating a ￡40 million impact on its 2024 earnings due to regulatory constraints. Despite these hurdles, the company remains steadfast in its strategic objectives and is optimistic about its capacity to foster growth and generate value for its shareholders.

In its full-year results for 2023, Entain reported figures that met expectations. The company recorded a 14 percent surge in Net Gaming Revenue (NGR), inclusive of a 50 percent share of BetMGM, and an 11 percent increase in reported Group NGR excluding the US. Online NGR saw a 12 percent growth, while Retail NGR rose by 9 percent, reflecting new acquisitions and the robustness of the retail estate. BetMGM demonstrated strong performance, achieving a 36 percent boost in NGR and a 14 percent market share in sports betting and iGaming. On the financial front, the Group’s EBITDA rose by 1 percent to ￡1,008 million , with a pre-tax profit of ￡339 million before separately disclosed items. However, the Group incurred a post-tax loss of ￡879 million due to a Deferred Prosecution Agreement settlement and other charges. Entain also declared a second interim dividend of ￡56.5 million and underscored its commitment to sustainability and responsible gaming. The Capital Allocation Committee is currently reviewing Entain’s markets and brands to augment shareholder value.

It’s crucial to understand that this is just the beginning, and the review forms part of Entain’s wider strategic goals to stimulate organic growth, broaden online margins, and enhance US market share. Consequently, any potential sale would likely be a strategic move to position Entain for enduring success in an increasingly competitive market.

As we await additional announcements from Entain, one thing is certain: the betting industry is observing closely, and the stakes are high. The outcome of this review could potentially shape the future of the industry, making this a narrative worth tracking for anyone interested in M&A, and the sports betting and iGaming sectors.