Thursday 17 October 2019

Paddy Power Betfair takes €115m punt on Georgia firm


Photo: PA
Photo: PA
John Mulligan

John Mulligan

Paddy Power Betfair has paid £101m (€115m) to buy a controlling 51pc stake in Georgia's leading online betting and gaming operator, Adjarabet.

The Irish gambling group expects to buy the remainder of the firm after three years.

The purchase also gives Paddy Power Betfair a position in the adjacent market of Armenia, where Adjarabet has a 10pc market share.

The stake in Adjarabet, which was founded in 1998, is being sold by a local entrepreneur.

Adjarabet has an estimated 40pc share of the total Georgian online gambling market, offering casino, sports, poker and peer-to-peer games.

In 2018, Adjarabet generated revenues of 215m Georgian Lari (GEL) (€70.6m) and earnings before interest, tax, depreciation and amortisation (ebitda) of GEL68m (€6.6m).

That compares to revenues of GEL157m (€51.5m) in 2017 and a profit after tax that year of GEL40m (€13.1m).

Paddy Power Betfair said that a mechanism has been agreed that enables it to buy the remaining 49pc of Adjarabet at a valuation equivalent to seven times the Georgian company's ebitda in 2021.

The consideration for the remaining 49pc can be settled, at Paddy Power Betfair's discretion, in either cash or shares.

The Irish company said that the online Georgian market is estimated to have grown at a compounded annual growth rate of 40pc between 2016 and 2018, to an estimated €205m of gross gaming revenue.

"This bolt-on acquisition is in line with our strategy of establishing podium positions in attractive online markets," said Paddy Power Betfair CEO Peter Jackson.

Davy Stockbrokers said the acquisition is reasonably modest in the overall context of Paddy Power Betfair's activities, and is expected to add a low to mid-single digit percentage to the broker's forecast adjusted earnings between 2019 and 2020.

"It is a timely reminder that the group investment thesis extends beyond merely the evolution of sector regulation," Davy said.

"The suite of growth opportunities available to Paddy Power Betfair, both organically and inorganically, remain extremely attractive," added the broker.

Goodbody Stockbrokers said that assuming 30pc ebitda growth at Adjarabet in 2019, the acquisition will raise Paddy Power Betfair's group ebitda by about 7pc.

It also noted that the price paid for the initial 51pc stake suggests a multiple of 10 times Adjarabet's 2018 ebitda.

"However, we would note that ebitda in 2018 is likely to be somewhat depressed by the fact the group was still in investment phase in Armenia," it added.

Last week, Isle of Man-headquartered casino game and software provider Red Tiger Gaming signed a deal to provide Adjarabet with its systems.

Shares in Paddy Power Betfair were trading 2.2pc higher early yesterday afternoon.

Irish Independent

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