Betsson Acquires Europe-Bet in $85 million Deal
Stockholm-based Betsson AB has acquired Georgia’s second-largest gaming company Europe-Bet in a deal worth up to $85 million. The purchase gives Betsson a 30% share of Georgia’s local gaming market and further strengthens the company’s ongoing expansion into Eastern Europe.
Speaking to the press on his first visit to Georgia since the deal was struck in June, CEO of Betsson Malta, Ulrik Bengtsson spoke of the “island of stability” offered by Georgia in a sometimes volatile region which made expansion into the country so attractive.
“This [acquisition] fits quite well with our portfolio of brands, and our acquisitions strategy, because it’s in a region which we know” says Bengtsson. “We have a big office in Kiev, where we operate software development and we have one of our business-to-business partners that runs a business in Turkey. [Another] reason why it made sense is that Georgia actually has a very robust, predictable, fair and commercially viable license regime which we really liked.”
Since its formation by a group of private entrepreneurs in 2010, Europe-Bet has established itself as a leading brand in Georgia’s gaming market, clipping at the heels of market-leader Adjarabet. Like most gaming companies, Europe-Bet does most of its business online, offering customers a range of gaming experiences from online poker and backgammon to live casino gaming.
In 2014, Europe-Bet’s revenues amounted to $52.4 million, with online operations accounting for $40.8 million, and the remainder coming from land-based business. The company’s EBIT margin was 38.1% and the company has managed to achieve solid double-digit growth in the few last years.
Betsson’s acquisition of Europe-Bet brings a company with 50 years’ experience in the gaming industry into the Georgian market. The company has been investing heavily in software development, counting 400 developers and software engineers within its group. Bengtsson is optimistic that expansion into Georgia can signal a step forward in sharpening its competitive edge in online customer experience.
“There are opportunities for us to over time move some of our central development to Georgia as well. However this requires a good talent pool of engineers” – Bengtsson explains – “if we think that the environment is good enough for us to do that, both in terms of the regulation for our existing business, but also in terms of having good cooperation with universities and the education system to provide the talent we need for building something like that. For a technology company in 2015, there is always a shortage of engineers. If we find them in Georgia, no one’s happier than me.”
According to Bengtsson, Georgia’s domestic market is made all the more attractive by a regulatory regime which is robust, fair and commercially viable even by the standards of many EU member counties: “If you look at France, for example, it has a regulation which is completely not viable commercially and not particularly fair. It’s purely rigged to protect the local monopoly, so in that sense Georgia is actually quite advanced.”
The stability of Georgia’s regulatory regime is a key factor in Betsson’s decision to expand into a new market. Europe-Bet was purchased from shareholders for an initial consideration of $50 million, with a further $35 payable after one year should Georgia’s gambling regulation remain unchanged. Meeting with government representatives during his time in Tbilisi, however, Bengtsson is confident that the Georgian government is committed to keeping the country open for business.
Given the success of Europe-Bet over the last few years, Betsson is also keen to keep majority of the current management in place, “We intend to keep the business here” says Bengtsson, “and we don’t want to move a lot of things outside of Georgia, we want to keep the Georgian business and the 750 people that are employed here.”
Betsson’s other key priority will be the continued growth of Europe-Bet and the continued improvement of customer experience: “We’re a growth company” Bengtsson explains, “and we expect this brand to grow at least at the same pace as the rest of Betsson, if not more. We’re going to do that by continuing to improve the product and customer experience and to launch more features for the sites to improve the customer journey.”
Joseph Alexander Smith