With Spanish gaming group Codere reportedly up for sale, M&A expert Christian Tirabassi expects a number of big gambling companies could be in the running to take over, though private equity is the most likely buyer.
According to a report from Spanish newspaper Expansión, Codere has been put up for sale at a valuation of over €2 billion ($2.3 billion). A purchase agreement is supposedly being targeted before the summer break in August.
The deal reportedly also includes online business Codere Online, which is primarily active in Spain and LatAm.
Tirabassi, founder and senior partner at M&A advisory firm Ficom Leisure, assesses Codere’s sale as “very much a private equity play”.
However, he also suggests several international gambling giants could be in the running for Codere, though he doesn’t see a “natural buyer” out there.
“Lottomatica is going to look into it, DraftKings is going to look into it, Entain is going to look into it,” Tirabassi tells iGB. “This is something for the big guys, because it gives access to a number of markets.”
Tirabassi’s comments echo Ed Birkin, managing director of H2 Gambling Capital, who told iGB on Wednesday he views the most likely buyers as Allwyn International or Flutter Entertainment, with private equity another possible option.
Is the €2 billion valuation too high for Codere?
Birkin said the mooted €2 billion valuation of Codere could mean it’s out of reach for the majority of operators outside of the elite tier ones.
Tirabassi also believes the amount is too high, though he suggests the leaked price is a deliberate tactic.
“Look, this is PR,” Tirabassi continues. “They clearly leaked the information to start to put the price in the market. I don’t believe it.
“To give you an idea, we have a clear understanding of every market they are active in, what they make in that market, and what their capex is. There is no way you can get to that valuation that was mentioned.”
Codere in dire need of investment
Codere is owned by approximately 84 investment funds, and Tirabassi says this sale process is clearly a case of the owners being in a position they didn’t forecast.
“Clearly, the bond holders or the debt holders found themselves in a position to be the owners of Codere without really wanting to be,” Tirabassi explains. “They didn’t really expect to be shareholders of this company.
“So, probably they have tried a little bit to see what they could do with it. They realised it’s not for them, and they put it for sale. It’s as simple as this.”
This disinterest has led to a severe lack of investment in Codere, leaving what Tirabassi describes as a “fatigued” business.
Tirabassai says Codere is currently like a “boat without any direction or anybody really driving it.
“It’s being underinvested, undercapitalised and now they are suffering because of the competition that they have in each market,” Tirabassi says. “There is a need for somebody that has a really clear industrial plan to relaunch the business.
“They need really a lot of care, capital, and a plan. Everywhere you look, it’s like nobody put any money into this. It’s like everything was frozen five years ago.”
Still value to be created in Codere
Despite Codere’s struggles, Tirabassi still feels there’s an opportunity to create value in the business, provided significant investment is made.
This means it could attract the interest of gambling operators, with such an acquisition making sense despite the “headache”.
“There is a lot of value to be created going forward, no doubt,” Tirabassi claims. “They are in all segments apart from lottery, and theoretically they are in digital with a single brand.
“So, this could be appealing for whoever wants a strong position in the Spanish-centric [markets], but also the Italian business is pretty healthy, even though it’s a competitive environment.”
Despite much of the gambling sector increasingly pivoting towards digital, Tirabassi says there’s still a real appetite for businesses that are primarily land-based.
“First of all, land-based makes money,” he continues. “That’s clear. Yes, it needs to be rationalised. Yes, the chain of control needs to be integrated. But it’s a profitable business.
“Secondly, if you properly use the digital with the land-based, it’s in a very, very strong proposition. It works extremely well. It also protects you from additional advertising restrictions. When you have land-based, obviously you’re less worried about any restrictions on advertising, which to me will continue to happen in a number of markets.”
Will Codere Online be included in the sale?
But Tirabassi also says that omnichannel propositions need to maintain various synergies to remain profitable, something he beleives Codere is severely lacking.
Much of the reaction to the news of Codere being up for sale was in response to the report that Codere Online will be involved in the deal.
Codere Online was spun off in 2021 and publicly listed on the US Nasdaq stock market, though Codere Group retains majority ownership.
Tirabassi believes Codere Online must form part of any deal, saying: “Today, Codere is basically two different companies, two different P&Ls. They kind of cooperate as a commercial agreement, but it’s not working.
“The idea that they carved out the digital was, in my view, very weird, if not to say worse, from the beginning.
“Clearly to me, it needs to be part of the package. And I’m sure that it’s in the interest of the seller to say that there is a digital component to raise the multiple, even though I don’t know how many people are going to buy that. That’s at least what I would do if I were the seller.”
Kyle Goldsmith
Kyle has been with Clarion since December 2023, joining from the world of sports journalism, subsequently becoming a LatAm-facing senior reporter with iGB.
