Entain’s Italian business could be the next asset on the chopping block following the operator’s recently announced sale of its CEE division, according to analysts at Rothschild & Co Redburn.
The Ladbrokes and Coral operator recently confirmed a 20% initial sale of its CEE division, which includes its Polish STS and Croatian SuperSport brands, to local JV partner EMMA Capital for an initial £366m.
The move follows significant Remote Gaming Duty and General Betting Duty hikes introduced in the November Budget, which reshaped the financial outlook for many UK-facing gaming operators.
Analyst Andrew Tam at Rothschild & Co Redburn noted that the CEE sale implies an Enterprise Value of £1.83bn, reflecting a 9.3 EBITDA multiple, or 45% above the multiple at which Entain currently trades.
In a note published on 30 June, Tam wrote: “CEE first, Italy next? By virtue of the structured put/call options between Entain and EMMA Capital, and the more standalone nature of the CEE business, it naturally became the easiest part of Entain to divest.”
Tam went on to argue that Entain’s Italian assets would attract strong interest from both financial and strategic buyers looking to capitalise on continued market consolidation.
He stated: “An Italian divestment would represent the next leg of the ongoing consolidation of the online gambling market in Italy. We see potential for a further £1.2-1.6bn of capital to be unlocked, once again at similarly attractive multiples (8-9x).”
Entain holds an approximate 8% market share in Italy through its Eurobet and Gioco Digitale brands, placing it behind larger rivals Lottomatica and Flutter in that market.
The analyst outlined a scenario where completing both the CEE divestment and a potential Italy sale could allow Entain to aggressively reduce its net debt to just £1.5bn, a figure that would continue to shrink after a £219m deferred prosecution agreement in the UK is settled.
Tam also highlighted Entain’s 50% stake in US joint venture BetMGM as a longer-term lever for further reducing leverage within the business.
He wrote: “BetMGM remains the main prize within Entain. An ongoing divestment programme would unlock significant capital and cut Entain’s leverage to the bottom end of management’s targeted 2-3x range earlier than expected.”
Tam further suggested that a leaner Entain structure would ultimately benefit investors by making BetMGM a more prominent and valued part of the remaining portfolio.
He added: “With BetMGM a bigger portion of the remaining Entain portfolio, investors are more likely to ascribe value to it. Meanwhile, a smaller and less complex Entain is equally more digestible.”
