Bally's Intralot Eyes Evoke Acquisition Amid Market Changes

Following Evoke's announcement regarding acquisition talks with Bally's Intralot, Bally's CEO Robeson Reeves provided insights into the company's international business strategy and the potential benefits of integrating Evoke's UK retail assets. During the recent earnings call for the fiscal year 2025, Reeves detailed the attractive aspects of Evoke that Bally's is considering.

Evoke disclosed that Bally's was contemplating an all-share deal valued at £0.50 per share. This move comes on the heels of Evoke's strategic review initiated in December, aimed at divesting parts or all of its operations, prompted by the UK government's substantial increase in Remote Gaming Duty this month.

In a discussion with analysts, Reeves expressed interest in Evoke's scale across Europe, stating, "We see a compelling opportunity to bring our operating model to a significantly larger business and the potential to transform its financial performance through synergies we are uniquely positioned to deliver." He emphasized the conviction with which Bally's is pursuing this opportunity.

Evoke's International Opportunity as a Strategic Asset

When asked about specific aspects of Evoke that appealed to Bally's, Reeves pointed to Italy as a particularly enticing market, noting the challenges of entry and Evoke's established presence there. He also mentioned Romania as an attractive option, along with Spain, which could further enhance Bally's existing footprint in the region.

According to Deutsche Bank analyst Richard Stuber, Evoke's Italian operations reportedly generate around £60 million in EBITDA each year, growing at a mid-teen percentage rate. Comparable assets in the market have historically traded at approximately eight times EBITDA. Evoke's international gaming revenue showcased a 14% increase in the fourth quarter, with both Italy and Denmark achieving record revenues.

Reeves conveyed optimism about the potential benefits of Evoke's international division for Bally's Interactive. He acknowledged a limited understanding of some markets, which makes the prospect of mergers and acquisitions appealing, as it allows for an expansion beyond the UK.

UK Retail Assets Retain Their Worth

Addressing inquiries about Evoke's UK retail operations, many of which are being phased out as part of its strategic review, Reeves asserted the importance of maintaining a retail presence. He described it as a valuable business that must operate closely with online channels. However, he also acknowledged the persistent challenges facing the UK retail sector, including the restrictions imposed on fixed-odds betting terminals and the impacts of COVID-19 lockdowns.

The recent increases in Remote Gaming Duty and betting taxes have forced operators like Entain and Flutter to downsize their retail portfolios, highlighting the pressures within the sector. Reeves noted, "Everything we’re looking at, we’re being honest with ourselves. We know UK online very well, and that will guide our strategy. Other assets can provide diversification, which is an added benefit."

Confidence in UK Growth Despite Tax Increases

Reeves expressed confidence in Bally's ability to outperform the market growth in the UK despite the recent tax hike. The company's B2C net gaming revenue in the UK rose by 10.5% year-on-year in the first quarter. Remarkably, just days after the tax increase, Bally's reported continued double-digit growth in B2C NGR.

As of mid-April, Bally's revenue from the UK constituted 30% of its total, with the United States accounting for 43% and Europe 11%. Reeves highlighted that Bally's product remains competitive, with active player numbers increasing by 7% year-on-year, even as some competitors have scaled back their marketing efforts.

He noted that the high-tax environment has opened doors for consolidation through M&A, stating, "The remote gaming duty change has created a more differentiated competitive landscape. Operators with thin margins are under real pressure. We are actively evaluating opportunities and will not miss a compelling one. The announcement regarding Evoke aligns with this strategy."

Reeves hinted at potential future M&A activities beyond Evoke, emphasizing their focus on regulated markets and strong brand positions. The company’s financial flexibility, bolstered by a €160 million undrawn revolving credit facility, positions them well for strategic acquisitions.

Evoke Acquisition's Impact on Bally's Capital Structure

Reeves refrained from detailing how acquiring Evoke might alter Bally’s capital structure, which had been clearly articulated following the merger of Bally's Interactive and Intralot in September. The group reported free cash flow of €93.4 million as of December.

He confirmed that pursuing the Evoke acquisition would necessitate a reevaluation of their capital structure moving forward. CFO Andreas Chryso reported that the group's adjusted net debt stood at €1.493 billion at the end of December, a significant rise from €334.2 million the previous year.

Nicole Macedo

Nicole Macedo began her career in local newsrooms in Gibraltar and played a pivotal role in launching the region's first online-only broadcaster.