Ladbrokes acquires Betdaq betting exchange

24/01/2013

Ladbrokes acquires Betdaq betting exchange for initial consideration of €30 million.

Overview

Ladbrokes plc ("Ladbrokes") one of the world's leading betting and gaming companies, has today agreed to acquire Global Betting Exchange Alderney Limited ("GBEA"), the operator of the Betdaq exchange business, for an initial consideration of €30m on a cash free/debt free basis from TBH Limited ("TBH"). In addition, Ladbrokes has agreed to acquire from TBH a 10% stake in TBH Guernsey Limited ("TBHG"), the technology provider to GBEA, for €4m, with a call option to acquire the remaining shares in TBHG after four years. The transaction is subject to certain conditions, including certain regulatory approvals and confirmations. It is expected to complete in late February 2013.

Rationale

  • Combines Ladbrokes' global brand and materially improved sportsbook with a high quality, scalable betting exchange to create the most comprehensive sports betting service in the market.
  • Accelerates Ladbrokes' strategy to grow digital revenues through investment in proprietary technology and delivery of best of breed products, providing a differentiated experience to customers.
  • Enables Ladbrokes to address the full spectrum of the broader sports betting market and access a greater share of existing and future customers' betting expenditure. A large proportion of Ladbrokes' customers already use a betting exchange.
  • Further enhances Ladbrokes' liability management, with more flexible and lower cost hedging option
  • The transaction is expected to be earnings accretive in 2013 1

Commenting on the acquisition, Richard Glynn, Ladbrokes' chief executive, said:

"The Betdaq exchange is a well-regarded and well invested business and a close strategic fit for Ladbrokes. Whilst the main focus of our digital growth strategy continues to progress well, this bolt on acquisition provides us with an exciting opportunity to grow our share of wallet through the creation of a differentiated and comprehensive sports betting proposition for customers and also supports our drive for improved liability management."

Operations and Product

Betdaq has been successfully developed using high quality technology by a dedicated team, with a long history in the exchange market. It is capable of supporting significantly higher betting volumes than are being transacted today. Ladbrokes will work with GBEA and TBHG to further enhance the competitiveness of the exchange, focussing initially on growing liquidity and event coverage as well as growing the range and depth of markets offered to both recreational and sophisticated customers.

GBEA will have a discrete management structure and its technology maintenance and development requirements will be wholly provided by TBHG. This will ensure continued focus on the further successful development of the exchange whilst importantly ensuring it does not impact on the delivery of IT projects within the Ladbrokes digital business.

Transaction structure

Betdaq comprises of two businesses: an exchange operator, GBEA and an exchange technology supplier TBHG.
The initial consideration for GBEA is €30m, with €15m of the consideration to be settled in Ladbrokes shares. GBEA generated profit after tax of €2.8m in the year ending 31 December 2012 on a pro forma basis and had gross assets of €35.4m.

In addition Ladbrokes will pay an earnout based upon the growth in GBEA's adjusted gross profits between the financial year ended 31 December 2012 and the financial year ended 31 December 2016.

Ladbrokes will also acquire 10% of the share capital in TBHG from TBH Limited for €4m, with an option to acquire the remaining 90% of TBHG once TBHG's results for the year ended 31 December 2016 have been finalised. Ladbrokes has an option to sell back its 10% interest in TBHG for €4m, if the call option is not exercised.

The total consideration for the acquisition of GBEA is capped and, as such, the transaction will not require shareholder approval.

Footnotes

1 Before accounting for amortisation and any possible exceptional items.

Notes to editors:

Ladbrokes will release its 2012 preliminary results on 21 February 2013. An analyst presentation will be held at Nomura International at One Angel Lane, EC4 R3AB

Background to Betdaq

Global Betting Exchange Alderney Limited (GBEA) owns and operates Betdaq, the world's second biggest betting exchange and also provides a fixed-odds betting platform to a variety of B2B customers from its central exchange hub.

GBEA is part of the Global Betting Exchange (GBE) group of companies, which also comprises TBH Guernsey Ltd (TBHG) which is responsible for the ownership, development and licensing of the exchange betting technology. GBE was established in 1999 and is owned by Irish entrepreneur, Dermot Desmond.

The exchange uses state-of the-art proprietary software, developed by TBHG and licensed to GBEA which will enable GBEA to continue to scale its business in a cost-efficient manner as well as license both Exchange betting platforms and GBEA's fixed-odds betting software to third parties.

The central GBEA hub matches in excess of £75m worth of bets each week from members and brokerages around the world.