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Flutter gambles on Italian market with £1.6bn Sisal deal

Italy is Europe's second-biggest regulated gambling market
Flutter gambles on Italian market with £1.6bn Sisal deal
  • Deal will be earnings-accretive in first 12 months
  • All-cash sum will be financed by additional borrowings

Flutter Entertainment (FLTR) is buying Italy’s biggest online gaming company, Sisal, for €1.91bn (£1.62bn).

The owner of the Paddy Power and Betfair brands is buying the business from private equity firm CVC Capital and said the deal will take its share of the online gaming market in Italy up to 20 per cent. Milan-based Sisal is expected to make a cash profit of £211m this year, 50 per cent of which will come from online gaming, with the remainder from retail and lottery businesses.

Italy is the second-biggest regulated gambling market in Europe after the UK, with gross revenues of about €19bn, according to regulator ADM and consultancy MDF Partners. Only 10 per cent of this was generated online, but this is a fast-growing part of the market and MDF Partners forecasts compound annual growth of 18 per cent to £3.6bn by 2024.

“For some time, we have wanted to pursue this market opportunity via an omni-channel strategy and this acquisition will ideally position us to do so,” said Flutter’s chief executive, Peter Jackson.

Flutter’s shares rose 3 per cent to 11,690p, giving it a market capitalisation of £20.5bn.

Flutter will pay for Sisal in cash with additional debt arranged through its bank, Barclays.

Flutter had net debt of £2.68bn at the end of June, or about 2.3-times earnings. However, it subsequently sold the Oddschecker business for an initial £135m and refinanced its debt, lowering its funding costs.

Although it expects the Sisal deal to be earnings accretive within the first 12 months of completion, it is continuing to pour money into its US operations and has said it will only look at paying dividends once it can bring debt levels down to between 1 and 2 times earnings, which may still be some way off. We maintain our hold recommendation.