FDJ-Kindred: logical corporate strategy
FDJ-Kindred analysis, Malta and Canada vs. blanchiment d'argent
Hello, on Gaming and Co today:
FDJ's takeover of Kindred Group makes sense when looking at its corporate strategy.
Malta strengthens AML processes.
Canada’s FINTRAC warns against gambling-related money laundering.
News in brief
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FDJ aims for France and EU dominance with Kindred takeover
FDJ’s move for Kindred fits into broader strategy of strengthening presence in France and European markets.
Key moment: The news that the board of Unibet’s parent company Kindred Group has approved a €2.6bn cash offer from La Française des Jeux comes at a crucial time for the online gambling industry in France.
For FDJ the announcement follows its acquisitions of Premier Lotteries Ireland and ZEturf in the past 12 months and is further confirmation of the expansion strategy it has set upon since it was privatised in 2019.
Should the deal go through it will be the French group’s largest acquisition ever and turn it into a European powerhouse of online gaming and betting.
Top trio: The ZETurf transaction enabled FDJ to become a top four online betting operator in France and the acquisition of Unibet would of course propel and cement its top 3 sport in France behind Betclic and Winamax.
Euro home: By acquiring Kindred, FDJ would also expand its European reach. Along with leading positions in Sweden, Denmark and unregulated Norway, Unibet is a market leader in Holland and Belgium and is active in Romania and Spain. It will be worth keeping an eye to see how it deals with Norway, an important Scandinavian market for Unibet.
On the product front, Kindred's Maria Casino, 32Red or bingo.com brands would provide further diversification for FDJ and, should the vertical become regulated in France, ready-made B2C brands to go live with.
Despite its recent focus on online channels, digital gaming currently generates around 2% of FDJ's revenues. By incorporating Kindred the French group would push that figure to up to around 20%.
Acquiring share: The team at Regulus Partners echoed this point. It said the “key reason for the bid is strategic” as FDJ generates “only c€250m” of online revenues from “genuinely open competition (prior to the Zeturf acquisition)” and therefore “has a desultory c11% market share in the competitive French online market despite a strong brand, ubiquitous distribution, lottery cash flow, and a land-based betting monopoly”.
In addition, the transaction would deliver FDJ a bona fide sportsbook with strong market share, but, according to Regulus, just below the level where the competition authorities would get involved.
L’État, c’est moi: Regulus noted that FDJ targeting Kindred also made sense from a competition-regulatory perspective. “Kindred has a c12% share of the French (OSB) market,” it said, “giving the combined entity a compelling 23%: big enough to be tier one, not big enough to be a competition issue.”
“While Winamax and Betclic have stronger market positions in France, they are likely to be too expensive and would risk not passing competition scrutiny given combined market share with FDJ would be comfortably over 30%,” added Regulus.
iCasino dynamic: More broadly, these issues also echo with the topic of online casino regulation in France. While Kindred is not directly part of that dynamic, it has the know-how and brands (both B2C and B2B) that would enable FDJ to hit the ground running should or when the vertical becomes legal.
Only last week, France's biggest casinos wrote to the government to complain of FDJ's broad remit and ability to be active across all gambling verticals; a view that is also shared by the country's online bookmakers.
Behind closed doors there is strong criticism of FDJ's aggressive corporate strategy as commercial stakeholders discuss the issue. But as one online brand told Gaming & Co: “FDJ has a free hand when it comes to how it operates; whether in relation to products, regulatory models or M&A.”
Successful close: For Kindred, the deal would see it successfully close out a turbulent 24 months.
During the period it hastily exited the Netherlands in October 2021 before reentering the market a year later, closed off its US activities, saw its CEO Henrik Tjarnstorm step down amid pressure from activist investors Corvex Management and, more recently, Eminence Capital, one of Entain's newest board members.
Logical step: The “strategic review” Kindred initiated in April 2023 and the group’s market share in France quickly led to speculation that FDJ would be circling around the Swedish company.
FDJ’s €2.6bn offer represents a 24% premium on Kindred’s share price. The Swedish group also released Q4 figures, revenues were up 2% YoY to £313m and EBITDA rose 45% to £57m, with regulatory issues in Norway and Belgium affecting growth, it said. The group confirmed its 2024 EBITDA targets of £250m.
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Malta enhances AML processes and infrastructure
Malta says it has strengthened its gambling compliance processes to minimise exposure to threats and vulnerabilities stemming from money laundering and terrorist financing.
Acronym central: The Measures were outlined as part of the National Risk Assessment (NRA) on Money Laundering (ML) and Funding for Terrorism (TF) review, which was initiated in 2021 by the Malta’s Finance Ministry following the jurisdiction being placed on the Financial Action Task Force’s (FATF) grey list.
With regard to online gambling, the NRA reports that risks of money laundering had decreased over the past five years, “reflecting the effectiveness of mitigating measures implemented by authorities and the private sector”.
Improvements could still be made however in relation to licensing, risk assessment and “complex ownership structures and networks”.
The Malta government said it will continue to focus on developing a “sustainable, risk-based, proactive, responsive, and effective anti-money laundering and countering the funding for terrorism (AML/CFT) framework”.
Canada watchdog warns of AML risks
Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC) has warned that the growth of online gambling during the COVID-19 pandemic “may present a higher risk of facilitating money laundering or terrorist financing activity”.
FINTRAC said these activities should be taken into account following regulatory changes such as in Ontario in 2022 and on wagering laws for single sports events in other provinces.
It was also especially relevant for “transactions involving sites operating outside legal and regulatory authorities - particularly if situated in jurisdictions with weak anti-money laundering or anti-terrorist financing regimes”.
FINTRAC analysed suspicious transaction reports related to online gambling between 2016 and 2023/. In the report it breaks down how bank accounts, prepaid cards and vouchers, e-wallets and payment service providers, virtual currencies as well as licensed online gambling platforms can all be used to launder proceeds of crime.
Further reading: FINTRAC report: laundering proceeds of crime through online gambling sites
News briefs
Intralot will supply its technology for a further two years to La Marocaine des Jeux et Sports (MDJS) after agreeing an extension with Morocco's lottery and sportsbook monopoly. The two groups have been collaborating since 2010, the contract extension will run until December 2025.
Cedric Pietersz has been appointed as the new CEO of the Curaçao Gaming Control Board. He will take up his role on 1 Feb and will oversee Curaçao’s transition to the National Ordinance for Games of Chance, its revamped regulatory regime.
EveryMatrix co-founder Stian Hornsletten will take over as CEO of its games division at the end of the month.
Calendar
6-8 Feb: ICE London
Feb 7: Disney/EPSN Bet
Feb 29: Lottomatica
Contact
Contact Jake Pollard to find out more about Gaming and Co: jake@gamingandco.info