October 19, 2016

Tampere selected to host Finland’s second casino

RAY, the Finnish Slot Machine Association, has selected the Central Deck and Arena project in the southern city of Tampere as the location for the second casino in Finland. The €550m project announced earlier this year is being developed by local property developer SRV and will include diverse restaurant, accommodation and entertainment services.

Tampere Arena“This is great news for SRV, and we are delighted that RAY selected our multifunctional arena as the location for their new game and event centre,” remarked Timo Nieminen, SRV Executive Vice President. “We will be proud to continue promoting this unique project, which – if realised – means that Tampere will have a completely new district.”

Several locations were considered for the Scandinavian country’s second casino license but RAY indicated that the combination of tourists and locals in Tampere as well as good transport connections would draw enough customers to make the facility profitable. SRV was selected in February 2016 to develop the project with plans for it to connect the eastern and western parts of Tampere. Negotiations have been ongoing during the year on the financing of the project and investor cooperation.

In addition to the casino, which will be the nation’s second in addition to Casino Helsinki, plans for the new 1.29 million sq ft development also include the largest sports and event arena in Finland. The complex would form a new hybrid block, combining a multifunctional arena, offices and apartments.

The first phase includes covering the southern railway yard with a deck, on which the event arena, two tower buildings and a training hall will be built. The second phase includes the building of a northern deck and three tower buildings. The entire site will include a total of 120,000 sqm and over a 1,000 apartments. The aim is to begin construction work of the southern deck and the event arena in spring 2017. According to the estimated schedule, the first phase will be completed in the summer of 2020, and the whole area in 2023.

October 18, 2016

William Hill scraps Amaya merger talks after shareholder dissent

Bookmaker William Hill has scrapped plans for a multibillion-pound merger with Canadian online poker giant Amaya just days after its largest shareholder openly opposed the deal.

The London-based betting firm said it would consider alternative plans that have the potential to grow sales, fleshing out its four priorities: "online, technology, efficiencies and international". The company will also restart share buybacks, which it suspended in July.

Last week, Parvus Asset Management — an activist investor with a history of blocking large takeovers — waded into the discussions, accusing William Hill of pursuing a tie-up that had “limited strategic logic” and would “destroy shareholder value”. Parvus has a 14.3pc stake in the company.

“After canvassing views from a number of William Hill’s major shareholders, the board has decided that it will not pursue discussions with Amaya," the bookmaker said today. “Accordingly, the board has informed Amaya that it is withdrawing from discussions and wishes Amaya well for the future.”

William Hill was in talks with Amaya, the parent company of the PokerStars online casino, even before it received a £3bn takeover bid from a consortium of Rank Group and 888 Holdings, which it subsequently rejected in August.

The company — which is currently seeking a new chief executive after ousting James Henderson for failing to revive its struggling online business — said performance had continued to be positive in the second half of the year.

William Hill expects operating profit for 2016 to be at the top end of the previously guided range of £260m to £280m.

Ladbrokes Coral’s ‘disappointing’ shops sale

Ladbrokes Coral was busy celebrating on Monday overcoming the “last significant hurdle” to its merger agreement. But the news that the company could only fetch £55.5m for the combined parcel of 359 shops it has offloaded to Betfred and Stan James will likely send shudders throughout the sector.

The shops sale was mandated by the Competition and Markets Authority (CMA) in the summer which said between 350 and 400 outlets needed to be sold in order to satisfy local competition issues from the merging of the two estates.

The disposal will see Betfred pick up 322 shops for a total of £55m while Stan James will pick up the rump of 37 shops for £0.5m. It leaves the Ladbrokes Coral combination with a total of 3,626, the largest estate in the UK, pushing William Hill into second place with 2,330 and with Betfred now rising to 1,688.

The shops in question generated an EBITDA contribution of £28.5m which translates to a multiple of around 2.2 times and analysts were quick to brand the price-tag as disappointing. Richard Stuber at Numis said he had previously pencilled in proceeds of circa £108m, based partly on speculation in the press that Boylesports would be willing to pay around £100m for the parcel.

Indeed, Gala Coral chief executive Carl leaver hinted that other bidders might have been willing to pay more for the shops but Ladbrokes Coral had opted for certainty in order to get the deal over the line and move towards final CMA clearance.

But as Paul Leyland, founder at gambling consultancy Regulus Partners, said the low multiple still reflects the long-term earnings decline at the high-street bookmakers and the potential impact of the Triennial Review of gaming machine stakes and prizes which is likely to be officially announced by the government within weeks.

The news of the divestment sent the analysts back to the drawing board with their valuations for high-street bookmakers. Simon French at Cenkos said the “very disappointing valuation” achieved or these shops “must raise significant questions over the appropriate medium-term multiple with which to value both the enlarged Ladbrokes Coral retail estate and that within William Hill”.

Stuber at Numis said the “risk to future retail cash flows has clearly increased over last few months”.

Although he said he appreciated the forced nature of the sale and cautioned that it couldn’t give a read-across the entire estate, he said it would be prudent to cut its valuation of the combined group’s high-street business from nearly six times EBITDA to a multiple of four times.

The news that it was Betfred and Stan James that had won the race for these divested shops will no doubt be a disappointment to many, including the failed bidders and other interested parties such as the British Horseracing Authority which had lobbied the CMA to ensure true competition by allowing for a new competitor to enter the high street.

As Leyland from Regulus said: “The divestment to two established UK high-street operators will no doubt satisfy the CMA requirement that the acquirers must be qualified. However, it also means that the merger will not create a challenger brand, nor is it likely to drive material change within the (increasingly stale) offer available to British licensed betting office customers, in our view.”

October 12, 2016

The End Of An Era: Atlantic City’s Trump Taj Mahal Closes Its Doors

Beginning with the closure of the Atlantic Club in January 2014, Atlantic City has seen the fat trimmed from its casino industry. The city has gone from 12 casino properties to just seven, following today’s closure of the Trump Taj Mahal.

The closure of Trump Taj Mahal is hitting people differently than the other four casinos that closed over the course of 2014 — Atlantic Club, Showboat, Trump Plaza, and Revel — due to the iconic nature of “The Taj,” which will forever hold a place in gambling history.

The Taj becomes an icon

Despite its persistent financial troubles, The Taj was the gambling destination on the East Coast for over a decade.

Its place in the pantheon of gambling destinations shouldn’t be overly surprising considering it was the first billion-dollar casino on the East Coast, and the only billion-dollar casino in Atlantic City for over a decade. Borgata, opened over a decade later, and just barely eclipsed the cost of the Trump Taj Mahal, coming in at a final cost of $1.1 billion.

In effect, The Taj was a Las Vegas Strip casino in Atlantic City.

The Taj poker room was the place to play poker, with poker players traveling from New York, Philadelphia, D.C. and Boston to grab a seat in the weekend games at The Taj. As popular as the poker room was, it was the movie Rounders that made The Taj poker room as well known in poker circles as the World Series of Poker, and really cemented its place in poker history.

The Taj tries to shoot the moon

As mentioned above, the beauty and impressiveness of the property hid Trump Taj Mahal’s big secret.

The casino was a financial disaster from the day it opened its doors in 1990, with only brief periods of prosperity in its two-and-a-half-decade history.

The Taj’s financial woes didn’t come about because the casino wasn’t busy, or because it was seen as lacking in any respect. The problem wasn’t execution; it was planning. The price tag to build it, and the interest rates on the bonds Donald Trump agreed to pay in order to get the necessary financing for the casino simply set the property up to fail. The Taj was doomed before it ever dealt a card or rolled a dice.

As Politifact has reported:

“He [Donald Trump] funded the construction of the $1 billion Trump Taj Mahal casino in Atlantic City, N.J., which opened in 1990, primarily with junk bonds at a whopping 14 percent interest. A year later, the casino was nearly $3 billion in debt, while Trump had racked up nearly $900 million in personal liabilities.”

In 1991, Trump Taj Mahal filed for the first of what would eventually be four bankruptcies:
  • The second bankruptcy occurred in 2004 (Trump Hotels and Casinos Resorts);
  • The third in 2009 (Trump Entertainment Resorts);
  • The fourth in 2014 (Trump Entertainment Resorts).
Trump’s personal interest in the casino was reduced from 47 percent to 27 percent following the 2004 bankruptcy, and to just 10 percent following the 2009 bankruptcy. His name remained on the side of the building but Donald Trump had been ousted as the chairman and lost control of operations following the 2009 bankruptcy.

Carl Icahn took control of the casino this year, and promised a $100 million investment in the property that many thought would breathe new life into the once opulent casino that had fallen into an extreme state of disrepair.

Icahn had recently turned around the Tropicana in Atlantic City, but a labor dispute resulted in a month-long strike, and with North Jersey casinos at least a possibility, Icahn decided to pull the plug and cut his losses.

Closure of the Taj Mahal may not be the end

Atlantic City’s capacity to support 12 casino properties was an open question well before neighboring states got into the casino business.

Once casinos started popping up on all sides of New Jersey, the question being asked wasn’t if Atlantic City could support 12 casino properties. Rather, it was “how many casinos need to close in order for Atlantic City’s casino industry to right-size itself?”

The current number of operational casinos in Atlantic City is seven. Developer Glenn Straub is trying to reopen Revel (which has been rebranded to TEN), which would bring the number of operational casinos in Atlantic City back up to eight. That may or may not be a viable number.

Some analysts think the market could support as many as eight casinos depending on other circumstances in the city and beyond. Others feel the proper number is no more than five or six casino properties, and even less if casinos are built in the northern part of the state in the coming years.

What happens next?

What happens to these shuttered casino properties will dictate the future of the once popular resort town.

Showboat has been green-lighted to reopen as a non-gaming hotel. If Trump Plaza, Atlantic Club, and Trump Taj Mahal can be repurposed in somewhat similar ways, it could be a boon for the city and its remaining casinos, all of which have seen operating profits rise since the 2014 casino contraction.

There are any number of uses for these massive properties:

They could be:
  • converted to housing;
  • turned into a non-gaming entertainment complex;
  • turned into shopping malls with retail and dining options.
  • The key is finding a way to repurpose these buildings so they’re not an eyesore on the Atlantic City skyline, or a depressing reminder of the city’s lost glory.

October 11, 2016

In poker terms, Amaya is offering William Hill a marginal hand

When William Hill threw out a cheeky three-way merger proposal from the Rank Group and 888 Holdings a couple of months ago, its chairman, Gareth Davis, explained robustly that the bookmaker would not be doing a deal based on “risk, debt and hope”.

Quite right, too. Life has become tougher for William Hill over the past year, and it has lost its chief executive on the way, but there was no reason to panic.

But now comes a deal the board wants to look at – a potential “merger of equals” with Amaya, the Canadian company whose PokerStars website dominates the world of online poker. But, using Davis’s own yardsticks, the appeal looks wobbly at best.

On risk, Amaya brings at least two big ones. The more obvious is a $870m (£704m) penalty in the US state of Kentucky. Amaya is probably correct in thinking it will not end up paying anything like that sum, but one can never be sure given US authorities’ past (baffling) attempts to combat online poker.

The other risk is that William Hill ends up with too much exposure to unregulated markets, meaning those where gambling is either banned or the rules are so unclear that your local operation can legislated out of existence. At the moment, William Hill’s exposure to unregulated territories is an admirably low 5%. After a merger with Amaya, the ratio would rise to about a quarter of the business. Big difference.

On debt, Amaya would bring a bundle. The combined group’s borrowings would be about 3.5 times the top-line profits. Historically, William Hill has aimed for under two times. If high levels of debt are not your bag, Amaya is a strange choice of partner.

The hope element is that cross-selling will do wonders for both companies – that Amaya’s poker players will want to bet on sport with William Hill, and vice versa. That seems plausible, but the degree is untested.

Add it up and we can agree that Amaya looks a better gamble than the complex Rank/888 proposal, where the debt ratios would have been even higher. The Canadian company is a fearsome generator of cash and it is digital and international – qualities prized by William Hill. All the same, there’s a whiff of desperation in the idea that an overdose of online poker, a game that’s barely growing these days, is the thing to fire up William Hill.

Note the limp reaction in the share price, up just 3%. In poker terms, Amaya is offering a marginal hand. William Hill’s investors may fairly feel the self-help cards are stronger.

September 26, 2016

Time to Reconsider Ban on Sports Betting?

An advisory group put together by the American Gaming Association recently recommended ending the federal ban against sports betting.

Sports gambling outside of Las Vegas is currently prohibited by federal law, according to the Professional and Amateur Sports Protection Act of 1992. However, the time has come for an open and regulated sports betting market. “It’s time to reconsider that national ban,” said Tim Murphy, former deputy director of the FBI and Chair of the advisory group.

States should have the right to decide whether to offer sports betting, recently recommended the board. In a bid to repeal the current legislation the group is set to lobby on Capitol Hill.

The American Gaming Association formed in 2015 and was launched as an initiative to expose the massive illegal gambling market. Murphy, the former FBI Deputy Director, said findings will be shared with legislators and stakeholders “so we can at least spur the critical national dialogue on this topic and get people involved and give them insight into how and why this needs to be changed.”

September 20, 2016

Barton investigated for betting on a Celtic match with Betfair

Rangers midfielder Joey Barton is reportedly being investigated for alleged betting on a Celtic match with Betfair, that is said to have been placed on his personal account.

The Scottish Football Association does not allow players, coaches, club officials and referees to bet on any football globally.

Barton is already in hot water with his club after picking up a three week ban for a recent training ground bust up.

The row is said to have been with manager Mark Warburton after Rangers, who are sponsored by 32Red, suffered a heavy 5-1 defeat in the Old Firm derby. The bet in question was allegedly placed by Barton on Celtic to lose by at least three goals in their following match to Barcelona; a bet he’d have won if so as the Bhoys went on to be hammered 7-0.

The Gambling Commission are now believed to be investigating the matter, and that both Rangers and Barton have been notified that the probe has been launched.

The Commission will present its case to the SFA. The report will then be presented to compliance officer Tony McGlennan, and it’ll be McGlennan that will decide on the outcome for Barton.

New Online Gambling Licenses In Greece To Be Released in October

Greece’s new licensing system for online gambling operators is set to be implemented by October. Deputy Finance Minister, Trifon Alexiadis, confirmed that the new rules would be made public “within a month”.

In 2011, Greek ran an experiment by issuing 24 “temporary” licenses to online gambling sites. The licenses were later suspended as the Greek government aimed to increase the betting monopoly that OPAP had. The government then sold one-third of the stake of the company. Alexiadis explained that this was to stop worldwide gambling operators from making profit while evading Greek’s taxes.

The experiment also revealed that many operators were producing false reports of their revenues. The Hellenic Gaming Commission (EEEP) surveyed the operators on their revenues and turnovers. Alexiadis said that public documents from these operators showed discrepancies compared to declared revenues.

Alexiadis also stated that the newer regulations were more optimized and put a cap on how much operators could earn from Greek betters. New regulations required foreign payment providers to report to the Greek authorities thus making it easier to track financial transactions from users to foreign operators.

Interestingly, many operators might be reluctant to apply for a license as Greek has a massive 35% punitive tax rate on gambling revenue. OPAP, the current monopoly in Greek gambling has also fallen victim to the new tax and reported a decrease in profits of 36% in Q2 of this year. The company clarified that if it wasn’t for the tax, profits would have risen 2% instead.

The EEEP has also been making efforts to curb online gambling without authorization and has recently started blocking more and more sites. As of August, 847 sites have been blacklisted by the EEEP. At the beginning of this year, the number of blocked sites was nearly half that.

August 25, 2016

Playtech's share price and market capitalisation jump as group treats investors to €150m special dividend

Gambling software group Playtech's share price popped to a record high this morning after it announced it will treat shareholders to a bumper €150m special dividend.

Playtech said it will make the payout in December, though it has also hiked its interim dividend by 15 per cent to €0.11. The company said the boosts were in anticipation of higher growth and cash generation.

Revenue at the group was up 18 per cent to €338m in the six months to 30 June.

Adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) reached €144m, a rise of 27 per cent.

Playtech's stock jumped around five per cent to over 944p on the news and took its market capitalisation above £3bn for the first time.

The jump means it is now the second largest gambling company in the UK in terms of market capitalisation, behind only the merged behemoth Paddy Power Betfair.

Its stock was trading around four per cent higher at the time of writing to 934.7p.

In the first half of this year Playtech continued to push forward with its M&A strategy by acquiring Swedish software firm Quickspin in May for €24m and buying up 90 per cent of Best Gaming Technology for €138m in July.

Chief executive Mor Weizer told City A.M. Playtech remains an "opportunistic and highly acquisitive company".

However, it is not aiming to join the wave of high-profile mergers, such as those between Paddy Power and Betfair and Ladbrokes and Gala Coral, anytime soon.

"Given the health pipeline of M&A in discussion we expect to remain busy and active in the coming quarters. We would never say never to a merger – every opportunity would be considered – but we intend to be the group leading the consolidating rather than being consolidated by others.

"We are very much focused on certain companies that can add to our capabilities at the moment and help us target greater international expansion," Weizer said.

Playtech supplies some of the most profitable bookmakers in markets such as the UK and Spain, including Betfred, Codere, Coral, Ladbrokes, Paddy Power Betfair and William Hill.

However, Weizer said the company intends to be "the most important B2B provider" in the gambling industry in the key regulated markets of the Czech Republic, Slovakia, Poland, the Netherlands and Mexico, among others.

It said it is "locking in" future growth in its gaming division, after announcing important new licensees this year including PokerStars and SunBets, as well as a slew of contract renewals that now put seven of its top 10 licensees on contracts with at least three years remaining.

Weizer told City A.M. he expects Playtech's casino and sports products to generate the most growth in the coming quarters, while mobile will be the group's most lucrative channel. Mobile growth grew 29 per cent in the first half in total and generated 54 per cent of UK revenues.

Chairman Alan Jackson said:

"Playtech has made significant progress in 2016 as we have delivered on our strategic objectives. The gaming division continues to deliver strong growth, driven by our industry-leading casino offering.

Given this progress, we remain confident of strong growth in 2016 and beyond."

August 24, 2016

Merger costs leave Paddy Power Betfair with £47.5m loss

Merger costs left Paddy Power Betfair with a £47.5 million sterling (€55.4 million) loss at the end of June.

The group also announced that that Paddy Power co-founder Stewart Kenny, who as chief executive led the Irish bookie’s flotation in 2001, is stepping down from the board.

Paddy Power Betfair said on Wednesday that revenues grew 18 per cent to £759 million in the six months ended June 30th from £642 million million during the same period last year.

Operating profits grew 39 per cent to £147.6 million from £106.5 million over the same period.

However, a charge of £195.1 million for the cost of merging Paddy Power and Betfair to create the group in February, left it with a £47.5 million loss.

That included £49 million for integrating the two businesses , which is likely to have cost a total of £65 million by the year’s end, and £50 million in fees and duty.

Chief executive, Breon Corcoran said that the restructuring that followed the merger of Paddy Power and Betfair in February is now completed and that savings are being delivered ahead of schedule.

Paddy Power Betfair now believes that the merger will cut the enlarged group’s costs by £65 million, £15 million more than originally expected, with the full benefit of this kicking in next year.

The group expects that earnings for the full year will be between £365 million and £385 million, 22 per cent to 25 per cent more than the £296 million total that the two businesses generated in 2015.

Its accounts treat the group’s figures as if Paddy Power and Betfair had always been merged.

In the first half, its on-line division, including Paddy Power and Betfair in Ireland, Britain and Europe, earned £140 million in operating profits, 40 per cent more than during the same period last year.

Its 603 Paddy Power betting shops in Britain and Ireland grew profits by 21 per cent to £23 million.

A sharp rise in costs left operating profits from Sportsbet in Australia trailing by 12 per cent at £26.1 million.

Product fees, inflation and an increase in jobs combined to drive the increase in costs. The group expects this to ease in the second half.

Profits at its US division, which includes of the horseracing and betting network, TVG and Betfair Casino, increased by more than 153 per cent to £2.9 milion.

Mr Corcoran pointed out that its industry remained highly competitive and was subject to regulation and economic conditions.

“Our strong market positions, increased scale and enhanced capabilities position us well for sustainable, profitable growth,” he said.

Mr Kenny co-founded Paddy Power in 1988 and was chief executive until 2002, the year after it launched on the Dublin stock market, and chaired it for a further year.

Current chairman, Gary McGann, noted Mr Kenny was retiring after many years of service to the company. “We wish him every success in the future and thank him for his incredible contribution to this business,” Mr McGann said.