Entain is one of the sports betting giants in the UK and the company has big plans to expand in 2023. The company has moved forward with the acquisition of STS Holdings for an amount of $946 million. STS is currently licensed to operate in the UK and Entain noticed the quality of the operation. Entain believes that adding the Polish sportsbook to the list of other acquisitions will help with expansion throughout Europe. Entain has acquired huge names in the industry in the past few years, including bwin, Coral, and Ladbrokes.
Earlier in 2023, STS Group made the decision to pull out of the UK market and focus on operations in Poland. This decision came after record results in 2022, but the company believed that efforts would be best spent on placing focus on the main market.
Entain made use of a fundraising program to raise the money needed for the purchase of STS. By providing retail offerings to investors and share placing, the company raised $761.6 million. While the company was successful in raising funds, it came with some backlash. After raising the money, shares plummeted on the stock exchange.
Shareholders Not Happy
With the huge purchase price of the STS sportsbook, shareholders are not happy with Entain’s decision. An investor group that owns 2.2% shares in Entain recently sent a letter to the Board of Directors that criticizes the latest deal. The letter encouraged Entain to place focus on valuable assets, like BetMGM, which has already posted 94% year-on-year growth during the first 2023 quarter.
The result of the new acquisition announcement resulted in a drastic fall in share prices. The value of the company on the London Stock Exchange fell by almost $200 per share. To help pay for the STS deal, Entain issued $760 million in shares, which is equal to 8% of its market capitalization. Shareholders are in an uproar as they see this acquisition as having little or no value. They support the company in pursuing rational acquisitions.
However, some analysts are seeing the positive side of the acquisition. “The deal makes sense when considering strategy and it will allow for expansion into fast-growing areas. STS is the largest operator in Poland and is licensed across European markets, including the UK. STS also has a great relationship with the regulators in Poland, which means the company would be in a prime position to take advantage of a legalized online casino if those laws are passed in Poland” – said CasinoGambler spokesperson, a website about online casinos in the UK .
Benefits of the Acquisition
While some think that there will be no value in obtaining STS, Entain has done significant research on t eh benefits that will come from the deal. The first is a great opportunity to acquire an asset located in a high-growth regulated market. The Polish gaming market had $1.6 billion of gross gaming revenue in 2022 alone and the market continues to grow.
There is also the benefit of getting the number 1 sports betting operator in Poland. STS is the market leader and has seen user growth over the past three years. Active users increased by 19% during this time and at the end of 2022, there were 783,000 users. Entain also hopes that there will be increased earnings during the first year of ownership. STS has delivered great financial performance and this is expected to continue.
Entain also recognizes the importance of the positive standing of STS in Poland. As a reputable sportsbook already licensed and generating revenue, the company would be first in line to apply for a remote gambling license. If Poland takes action to enact laws that would allow for online casinos to operate, STS would be a frontrunner. Now in the hands of Entain, this will present an opportunity for even further growth. Entain already owns many successful online casinos, so the company is fully aware of the value they hold.
Entain has also agreed to keep Mateuz Juroszek as the CEO of STS. Since 2012, Mateusz has held this position and has been a major factor in driving the growth of the company. With extensive knowledge of the company as well as the gaming market in Poland, Entain is happy to announce he will remain in the CEO position and will join the Entain CEE board.
Another benefit to working with Mateusz is that he and his father hold 70% of the firm share in STS. They have agreed to accept the offer and promise to re-invest a portion of the proceeds into the Central and Eastern European Entain operations for a 10% stake return.