bet365 Eyes $12 Billion Sale or US IPO 

A Big Crossroads for bet365

The Coates family, who turned bet365 into a global betting giant from a Stoke-on-Trent base, is mulling some hefty strategic moves. Informal chats with Wall Street banks and US advisors have kicked off, exploring options like selling the company, launching a US initial public offering (IPO), offloading a chunk to private equity, or spinning off parts of the business.

A full sale could value bet365 at £9 billion, or roughly $11.3 to $12 billion, with Denise Coates, holding 58% of shares, potentially pocketing over £5 billion.

“It’s an extraordinary success story driven by the Coates family,” said Ivor Jones, an analyst at Peel Hunt. “If this remarkable business is looking for new investors, I would expect the queues to stretch halfway round Stoke.”

These plans come off a strong financial rebound, with bet365 posting a £626.6 million pre-tax profit for the year ending March 2024, flipping a prior year’s loss, and revenues up 9%.

The push into the US, where sports betting is exploding, has been a key driver, but the family’s eyeing ways to cash in or fuel further growth. With Denise Coates nearing 60, the timing feels right to shake things up.

Why Sell or Go Public?

The US betting market, projected to hit $23.3 billion by 2029, is the big prize. Bet365’s got licenses in 13 states, including recent launches in Arizona, Indiana, Iowa, Kentucky, Louisiana, and North Carolina, and a planned July 2024 debut in Pennsylvania. It’s also gunning for Missouri.

These moves boosted profits, but grabbing a bigger slice of the US pie, where bet365 holds just 2.5% market share, needs serious cash. A US IPO could tap deep American investment pools, while a sale or private equity deal might bankroll an aggressive push against giants like FanDuel and DraftKings.

The family’s also tidying up to look sharp for buyers or investors. Pulling out of China, where gambling’s illegal, dodges red flags for US investors wary of murky regulations. Handing Stoke City FC’s ownership to John Coates, Denise’s brother, strips away a “family legacy” that might not vibe with Wall Street.

“It would be very difficult to have China exposure given the scrutiny in the US, and why would you have a football club attached, that’s a family legacy,” said Paul Leyland of Regulus Partners.

“When they announced they’re getting out of China, that seemed as though they were just tidying up shop completely for something to happen,” added Ed Birkin of H2 Gambling Capital, tying the club transfer to a bigger deal.

Challenges and Market Pressures

Despite its financial glow-up, bet365’s facing heat. Competitors are catching up on in-play betting, a bet365 forte, and VIP and gray-market revenues are drying up in mature European markets. “Bet365 hasn’t found a similar growth engine for a world where in-play is a mature commodity,” Leyland noted, pointing to a “dangerously rapid” market share slip.

A sale or IPO could inject funds to innovate or double down on the US, where high-profile deals with the St. Louis Cardinals, Denver Nuggets, and Colorado Avalanche, plus a new Denver HQ aiming for 1,000 jobs, show bet365’s all-in.

A sale might end bet365’s run as a private British success story, but a buyer like DraftKings, with a $16.64 billion market cap, could see its 2.5% US share as a growth shot, though the £9 billion tag might spark debate.

An IPO, meanwhile, would thrust bet365 into the public eye, forcing transparency for a famously private firm, but it could rival Flutter Entertainment and DraftKings in market cap, leapfrogging most casino operators.

Industry Trends and What’s Next

Bet365’s moves fit a broader wave of gambling industry consolidation. Mergers and acquisitions are shrinking the field, leaving fewer but beefier players. This could mean less competition, potentially hiking prices or limiting consumer choice, but bigger firms might also pour resources into tech like AI or machine learning, spurring innovation in online betting.

“There’s more money chasing gambling than there are gambling companies that are investable,” Leyland said, hinting at hot demand for assets like bet365.

A private equity deal could let the Coates family keep control while cashing out partly, possibly as a stepping stone to an IPO. Spinning off operations, though less clear, might carve out non-core units to streamline for a deal.

Each path carries trade-offs: a sale maximizes payout but ends family control, an IPO fuels growth but demands openness, and private equity balances both but delays bigger moves.