The decision by Sky Bet owner CVC Capital Partners to hire investment bank Rothschild to examine a possible initial public offering (IPO) demonstrates the rapid growth in online gambling in recent years.
According to a new report, Rothschild is looking to hold a “beauty contest” to find the banks to arrange the IPO, which could see the Leeds-based betting firm valued at between £2.5bn and £3bn.
The valuation would be a 300% increase over the price CVC paid to acquire an 80% stake in the business from satellite broadcaster Sky just three years ago, which valued the company at the time at £800m. Sky still holds the remaining 20% of the company.
The rapid growth of Sky Bet is just the latest demonstration of how online gambling has revolutionised the industry. Last year, Britain’s largest high street betting shop, Ladbrokes Coral, agreed to be bought for £3.2bn by the Isle of Mann-based online gambling company GVC Holdings, a firm that was only founded in 2004.
The value of Sky Bet, and its sub brands that cover everything from an online casino to fantasy football games, are that the enterprise is online-only, and so is able to operate with significantly lower overheads than high street competitors. The branding tie-ins with Sky’s sports broadcasting is another bonus.
The latest official industry figures show that online gambling accounts for more than a third of all gambling in Britain today, with online operators generating a gross gambling yield (GGY) of more than £4.5bn a year. In the last couple of years it has outgrown the high street betting sector, traditional casinos, and even the national lottery to become the largest gambling sector in the UK.
Along with the growth in the sector comes fears that the fierce competition to sign up new players have caused some operators to skirt the law. A joint investigation by the Competition and Markets Authority (CMA) and Gambling Commission found that some operators used “unfair” tactics to attract new business, and firms have been ordered to immediately take steps to address the issue. Ladbrokes, William Hill, and PT Entertainment have already agreed to change their online games promotions in response to the report.
Photograph by Jarmoluk