Ladbrokes buying Betdaq for €30m from Desmond
Published 25/01/2013 | 05:00
Ladbrokes has agreed to buy financier Dermot Desmond's betting exchange, Betdaq, for €30m.
The UK bookmaker confirmed the deal yesterday after months of speculation that it was poised to pounce on the firm, which Mr Desmond established over a decade ago.
Ladbrokes said it's paying €15m of the initial purchase price in cash and the remainder in its own shares. Mr Desmond already has a small stake in Ladbrokes. Shares in the betting firm rose more than 3pc yesterday.
Ladbrokes will also pay an unspecified earn-out based on the growth in Betdaq's adjusted gross profits between the end of 2012 and the end of 2016.
Betdaq – excluding the technology arm – generated a €2.8m profit after tax last year and had gross assets of €35.4m at the end of December.
The acquisition of Betdaq, which is expected to close at the end of February, is an "exciting opportunity" for Ladbrokes, said the UK group's chief executive, Richard Glynn.
As part of the deal, which includes the initial €30m payment, Ladbrokes has agreed to pay an additional €4m to buy a 10pc stake in a subsidiary of Betdaq's immediate parent firm, TBH.
Ladbrokes now has a call option to acquire the remainder of the subsidiary after four years. That subsidiary, TBH Guernsey, is responsible for the ownership, development and licensing of Betdaq's exchange betting technology.
Ladbrokes said it has an option to sell back the 10pc interest it's acquiring in the technology subsidiary for €4m if the call option is not ultimately exercised.
"The Betdaq exchange is a well-regarded and well-invested business and a close strategic fit for Ladbrokes," said Mr Glynn. He added that while the main focus of Ladbrokes' digital growth strategy continues to "progress well", the acquisition of Betdaq would enable it to grow its share of the bet spend through the creation of a "differentiated and comprehensive sports betting proposition".
The deal is being undertaken on a debt-free, cash-free basis.
Ladbrokes said the purchase of Betdaq would accelerate its strategy to grow digital revenues through investment in proprietary technology and delivery of products. It added that a large proportion of its customers already use a betting exchange and that it would now be able to address the "full spectrum of the broader sports betting market".
Ladbrokes already had a technical business relationship with Betdaq, which is the world's second biggest betting exchange and matches about £75m (€89m) in bets each week from members and brokerages around the world.
In the first six months of 2012, Ladbrokes said operating profit at its digital arm declined almost 50pc to £15m (€17.7m) as a result of expansion costs and worse-than-anticipated margins.