Flutter’s $2.6bn Snaitech deal

December 2024 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

December 2024 Issue

Following several weeks of speculation, in mid-September Flutter Entertainment announced it had reached an agreement with Playtech Plc to acquire Snaitech SPA for $2.6bn, aiming to take the “gold medal podium position” in Italian gambling.

The deal is expected to close by the second quarter of 2025 and will add to earnings per share immediately for Flutter, the world’s largest gambling company.

Setting out its reasons for the purchase, Flutter said the deal aligns with its strategy to “invest in leadership positions” in international markets. Furthermore, the company said the addition of Snaitech will expand its Italian operations, which already include PokerStars, Betfair and Tombola. The deal strengthens its competitive position in the “fast growing” Italian market, the company noted. Flutter also acquired Italian gambling site Sisal in 2021.

In August 2023, Playtech announced that it had entered negotiations with Flutter, stating it would only consider a bid above €2bn to sell the company. According to Playtech, the deal saw the company secure peak value for Snaitech, as the cash consideration represents £6.27 per share, a 16.5 percent premium over Playtech’s share price of £5.38 before the initial speculation about a potential deal appeared. Flutter’s cash offer of €2.3bn represents a nine times multiple of Snaitech’s 2023 adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of €256m.

The deal will conclude with Playtech returning a special dividend to shareholders of £1.7bn to £1.8bn, with the reward expected to range between £4.56 and £4.83 per share. Part of the proceeds from the sale of Snaitech will be used to repay a €350m bond from 2019, strengthening the company’s financial position for future growth. Playtech initially acquired a 70 percent stake in Snaitech in 2018 for €300m.

“This transaction is compelling strategically and financially,” said Peter Jackson, chief executive of Flutter. “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.”

Snai is the number three online operator in the Italian market with a 9.9 percent share in 2023 and 291,000 average monthly players. Online revenue and adjusted EBITDA have grown at a compound rate of 26 percent and 32 percent respectively, in the four fiscal years to 2023.

This is supported by a strong retail presence with over 2000 sites driving a number two retail share position in both betting of 19 percent and gaming of 14 percent.

Snai generated 100 percent regulated revenue of €947m, which is after the deduction of gaming duties, and adjusted EBITDA of €256m in financial year 2023, of which 50 percent was generated online.

According to Flutter, in Italy just 21 percent of gross gaming revenue is bet online compared to over 60 percent in more mature markets like the UK and Australia. However, greater digital adoption is expected to drive online market growth at a compound rate of around 10 percent over the next three years, the company noted, citing research from Regulus Partners.

Going forward, Flutter will use its ‘EDGE’ programme to enhance and align Snaitech’s operating systems with new capabilities across pricing and risk management, in-house casino content, and operational platforms.

Flutter is targeting synergies and cost savings of €70m over a three-year period. Following the deal, Flutter’s leverage ratio is expected to rise temporarily, but it is anticipated to decrease rapidly due to profitable growth in Italy’s online market.

Richard Summerfield