Formula One’s major shareholder, CVC Capital Partners, has finally breached into the online gambling world after agreeing a deal with Sky to acquire a controlling stake in its Sky Betting and Gaming (Sky Bet) division for a potential £800 million.
The deal will see Sky receive £600 million cash on completion, and a further deferred and contingent consideration up to the value of £120 million. Sky will retain an equity stake of approximately 20 per cent in Sky Bet and ongoing board representation. As part of the transaction Sky has also entered into a long-term brand licence agreement with Sky Bet.
In a statement, Sky explained that the “crystallises value for Sky that has been created in Sky Bet, and enables the enlarged Sky to focus on the significant opportunity for growth in pay-TV across the five markets in which it now operates”.
Jeremy Darroch, group chief executive of Sky, said: “In the last ten years, we have successfully grown Sky Bet from a start-up to one of the leading online betting and gaming companies in the UK. This transaction will allow us to focus further on the substantial growth opportunities in our core international pay-TV business while realising significant value for our shareholders.”
For CVC Capital Partners, it represents a breakthrough into a sector it had previously attempted to enter through the failed acquisition of leading UK betting exchange Betfair in 2013. Then, CVC was unable to convince the CEO Breon Corcoran of its vision for the company’s future, although sources close to CVC said the acquiring group was stretched by the price and risk involved in any deal.
Jake Pollard, online editor at leading online gaming trade publication, iGaming Business, told TVBEurope: “The deal is eye-catching for the amounts involved and the high multiple CVC paid. But Sky Bet is free of regulatory risk and already factors in point of consumption tax into its betting figures, while gaming is not its core business,” he said.
“Management also believes there is room for expansion in Italy and Germany via Sky Italia and Sky Deutschland. Premier League TV rights are up for renewal in early 2015 and a £600m upfront windfall will always be useful for Sky.”
Rob Lucas, Managing Partner of CVC, said in an official announcement: “We are delighted to have agreed to acquire a controlling stake in Sky Bet. Richard Flint (MD) and his team have built a fantastic business, which is a leader in the fast growing mobile and online, betting and gaming markets. The partnership between CVC and Sky will provide a strong platform to support Sky Bet’s ongoing success at this exciting point in its development.”
The transaction is subject to regulatory clearances in the UK and Ireland and is expected to close in the first quarter of 2015.