SportRadar Valued at $2.4 Billion, EQT Sells 35% Stake

SportRadar

Less than 2 months after SCOTUS struck down PASPA allowing for the legalization of single game sports betting on a state-by-state basis, EQT sold its stake (35%) in Sportradar to the Canada Pension Plan Investment Board (CPPIB) and TCV (a P.E. firm), at a $2.4 billion valuation (including debt). Sportradar provides statistics, results, odds suggestions, virtual gaming and risk management services for licensed betting operators around the world; the company also has a sports data component (work with 65 organizations, including NFL and NBA) and has established itself as the authority in the sports betting Integrity Services space (i.e. fraud detection). EQT intends on re-investing an undisclosed portion of the sales proceeds in a small SportRadar stake; SportRadar will not receive any new capital. CPPIB and TCV bought 37% of the company in total, acquiring the remaining 2% of shares from minority investors; the deal is expected to close in Q4.

Howie Long-Short: EQT is a Swedish P.E. group that trades on the NYSE under the symbol EQGP. It was reported that EQGP’s bid won out over rival buyout firms KKR & Co. and Blackstone Group. At $2.4 billion the sale price represents a return of 4+ times, on the $52 million investment EQT Partners made in SportRadar back in July ‘12. Shares rose +1% ($24.00) on Monday’s news.

For informational purposes, the company generated $145 million in ’17 EBITDA (before the cost of sports rights) on $336 million in sales. The NFL, Mark Cuban, Michael Jordan and Ted Leonsis are all invested in the company.

Fan Marino: Height Capital Markets has projected that 16 U.S. states (outside Nevada) will offer single game sports betting before the end of 2019, generating +/- $700 million in “new” gross gaming revenue. If that’s accurate, Penn National Gaming (PENN), Caesars Entertainment (CZR) and Pinnacle Entertainment (PNK) are the gaming companies that will have the largest land-based casino presence within states that offer sports betting next year; with 17, 15 and 11 properties, respectively. Eldorado Resorts (ERI, 10 casinos), Boyd Gaming (BYD, 9 casinos), Tropicana Entertainment (TPCA, 5 casinos) MGM Resorts (MGM, 4 casinos), Churchill Downs (CHDN, 3 casinos), Full House Reports (FLL, 2 casinos), Empire Resorts (NYNY, 2 casinos) and Dover Downs (DDE, 1 casino) all expect to be in business as well.

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Yahoo! Exits European DFS Market

Yahoo!

Less than a year after entering the European market, Yahoo! (AABA) has decided it will cease hosting paid-entry daily fantasy sports contests for its overseas users. The decision, effective at the completion of the English Premier League season (May 14), will leave free contests (including season-long offerings) as the only options available on the U.K. platform. Yahoo! isn’t the first DFS provider to pull out of Europe, FanDuel engaged U.K. users in 2016 before deciding to re-allocate marketing resources to a U.S. market with 5x the number of DFS players (53 million to 10 million).

Howie Long-Short: Yahoo! is exiting the U.K. DFS market for the same reason U.S. DFS operators are gearing up for legalized sports betting; there is no market for “substitute” gambling, when in-game betting is a reality. Those that play fantasy sports for fun, compete in free season-long competitions; while those that want in the action, have sports gaming apps at their disposal.

DraftKings UK, Sportito and PlayON are the biggest remaining DFS players in Europe. DraftKings has raised capital from 21st Century Fox (FOXA). Sportito is a joint venture between ASAP Italia and SportRadar. EQT Holdings Management (EQGP), a publicly traded private equity/venture capital firm with 11 exits (IPO/M&A) to its name, led Sportradar’s +/- $55 million P.E. round in July ’12. As for PlayON, despite the company’s $43 million valuation; there are no ways invest in the company.

Fan Marino: Speaking of DraftKings, the company recently announced a partnership with the Arena Football League, that will give users the ability to compete in newly formed contests while watching league games within the application. It’s the 2nd broadcast rights deal the DFS company has signed within the last 6 months. In October, DraftKings secured rights to live stream EuroLeague games (applies to players participating in contests $3+).

As non-traditional players (think: FAANG) begin acquiring sports rights, keep an eye on the gaming companies. DraftKings CEO Matt Kalish hit the nail on the head when pointing out that what DFS players (and gamblers) “really want is a one-stop shop”, where you can play (and in the future gamble) and “consume game content” in the same location.

DraftKings has made no secret of their intention on moving into the sports betting space, should SCOTUS rule it legal. Corporate spokesman James Chisholm was quoted as saying DFS companies are “perfectly positioned to succeed (think: 10 million users) in a legal sports betting market.” The company has hired a “Head of Sportsbook” and is reportedly “contacting potential casino partners.”

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Legalized Sports Betting Imminent, Sportradar Integrity Services Prevent Potential Corruption

Sportradar

Sportradar launched in 2001 with the intention of becoming the top service provider for licensed betting operators around the world; providing statistics, resulting, odds suggestions, virtual gaming, risk management services and more. They’ve accomplished that goal, added a sports data component to their business (work with 65 organizations, including NFL and NBA) and they have also established themselves as the authority in the sports betting Integrity Services space. With the legalization of sports betting imminent, JohnWallStreet took an opportunity to speak with Sportradar’s Director of Communications, Alex Inglot to discuss how Sportradar identifies match manipulation, the prevalence of match fixing and the highest profile game they flagged corruption within.

JWS: How does the company identify a game that may have been fixed?

Alex: We have unique access to the odds movements and odds patterns to over 600 bookmakers around the world. On the back of that data, we built what today are called Integrity Services; anchored in the idea that you can use betting patterns to identify suspicious or manipulated matches. Today we can also provide technology and monitoring systems to state governmental authorities to monitor regulated betting under their jurisdiction, something highly relevant to the US given the current sports betting regulatory climate.

JWS: You guys work with over 70 different sporting organizations across 17 different sports and have been offering Integrity Services since 2005. Are you regularly identifying games that have suspicious patterns or is this a rare occurrence?

Alex: The vast majority of the events we monitor do not display indications of suspicion, but we’ve identified over 3,506 matches (that have been manipulated), since 2009 and have initiated or supported well over 200 sporting sanctions and 24 criminal convictions; all using our reports and our analysis.

JWS: Is there one specific case that Sportradar is known for?

Alex: The most high-profile case we’ve been involved in is the case FIFA brought against Lamptey. FIFA brought a case against Ghanaian official Joseph Lamptey, the referee who officiated a World Cup qualifier between South Africa and Senegal in 2016 after we identified it as a fixed match; that the referee had manipulated the match to ensure a certain number of goals. The highest arbitration court for sports (CAS) determined our report was correct and Lamptey was banned from refereeing for life. The most important result from the case though, was that the match was replayed; the first time a match of that magnitude had been replayed due to match fixing. 

Howie Long-Short: Sportradar raised a private equity round worth +/- $55 million in July ’12 from EQT Holdings Management (EQGP), a publicly traded private equity/venture capital firm with 11 exits (IPO/M&A) to its name. In October ’15, the company raised another +/- $45 million; Revolution led the round that also included Michael Jordan, Mark Cuban and Ted Leonsis.

Fan Marino: The SCOTUS has guaranteed a decision on the NJ betting case by the end of June, but expect that decision to come in the next 6 weeks. The SCOTUS typically rules on a case within 90 days of oral arguments, which last took place on December 14, 2017. It is possible the decision could come as soon as next Monday (March 5); April 2nd and April 30th would be the next 2 potential decision dates.

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