Bookies to Lead Way in Consolidation of Listed Sector, Analyst Says

Not a forecast the online gambling industry hasn't heard before, but one London equity analyst expects the listed sector to begin consolidating soon, with bookmakers to play a central role.

Ivor Jones of Evolution Securities wrote in note to clients Monday that Bwin Interactive A.G., Sportingbet and Unibet are the most likely to participate in some form of consolidation.

"It is easier to argue for the long-term growth of sports betting than for casino and poker," he said. "Running a sports book is relatively expensive, getting more so with the increased dependence on live betting, and most of the duplicated costs can be eliminated."

M&A among bookmakers has been spearheaded of late by Mangas Capital Gaming, the majority owner of Betclick, which this month announced the acquisitions of Bet-at-Home and Expekt.

In terms of highest sports betting revenue potential, Mr. Jones picked a combination of Sportingbet and Bwin.

Bwin nearly acquired Sportingbet two years ago, though the deal was allegedly derailed by Sportingbet's decision then to continue operations in Turkey after prohibitive legislation had passed there.

"It is clear that BWIN and Sportingbet would be the dominant listed European sports bookmaker, remarkably far ahead of Ladbrokes and William Hill despite their much longer histories and offline assets," he said.

Evolution estimates that in the 2009 fiscal year, Bwin will generate 198 million euros in sports betting revenue, and Sportingbet, £123 million.

Mr. Jones said M&A activity is likely to start with a flurry of deals "by companies that don't want to be left behind, and we expect share prices to rally rapidly."

More reservedly, Gavin Kelleher, an analyst with H2 Gambling Capital, told IGamingNews Tuesday that accurately gauging whether the sector will see an increasing number of large deals remains difficult.

However, he said that the likelihood of deals going through has increased recently.

"The current economic backdrop is likely to make top-line growth harder to come by in the more established online betting markets, and the rationale for merging cost structures between two operators has got greater than it has been in the past," he said.