French FDJ Places $2.8 Billion Bid to Acquire Kindred Group

The European gambling market is undergoing a significant shakeup after French gambling giant Francaise des Jeux (FDJ) recently submitted a takeover bid of the Swedish iGaming juggernaut Kindred Group. FDJ confirmed that it had tabled a bid for 130 SEK ($12.0/€11.48) a share to complete the transaction. Considering this figure with the Kindred Group’s January 19th closing price, it translates to an enterprise value of about $2.83 billion (€2.6 billion), a premium of about 24%.

Should the merger go through, the resulting collaboration would create Europe’s second-biggest online gaming operator behind only Bet365. The FDJ Group expressed delight and confidence that its bid was sufficient to build a game-changing European gaming steamroller.

Stephane Pallez, the Chairwoman and CEO of the FDJ Group, put out a statement detailing some of the reasons FDJ felt compelled to bid for the acquisition of the Kindred Group. The statement read in part:

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“I am pleased to announce today the proposed acquisition of Kindred. Fully aligned with our strategy, it will give the group a diversified and balanced profile based on several pillars: the monopoly activities, mainly the lottery on our French historical market, and since November, in Ireland, with the acquisition of the Irish Lottery operator PLI; and online sports betting and gaming activities open to competition in Europe. In this market, Kindred is one of the leading operators, combining strong brands, best-in-class technology platforms, an attractive growth profile, and a committed approach to responsible gambling.”

Kindred’s Board Recommends the Offer

Those in FDJ’s corner are highly optimistic about the success of this acquisition, especially in the wake of Kindred’s board approval of the merger. Besides the possibility of the two operators creating a European powerhouse, the board feels that the acquisition will create value for the majority of FDJ shareholders.

Industry insiders also believe that starting from the 2025 financial year towards 2026, the accretion of dividends per share will break the 10% barrier. The backing by members of the FDJ board was unanimous, and the members agreed that the offer was ‘the most attractive outcome for shareholders.’ Kindred’s board noted:

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“The Board believes that the terms of the offer recognize Kindred’s long-term growth prospects, taking into account the risks and uncertainties associated with the realization of those prospects.”

In supporting the FDJ bid, the Kindred Group’s Board also evaluated the potential impacts of licensing changes in the company’s locally regulated and dot com markets. This was a critical aspect of consideration as it could weigh heavily on the company’s revenue growth or profitability going forward.

Besides the board, five key Kindred shareholders who possess 27.9% of all shares have also echoed their support for FDJ’s proposed bid. In this case, the five shareholders are Corvex Management, Eminence Capital, Premier Investissement, Nordea, and Veralda Investment.

That said, the deal still has a long way to go, especially considering that 90% of Kindred shareholders need to be on board with the offer. There also needs to be regulatory approval, and another party could also throw its hat in the ring to try and acquire FDJ as well.

Kindred’s Well Documented Struggles

It’s been an open secret to all and sundry that Kindred has not been satisfied with its prevailing condition in the European gambling market. This was further proven when the organization conducted a strategic review in April last year. The goal of the strategic review was to find ways to maximize its shareholder value. This strategic review paved the way for a series of changes aimed at improving the company’s standing in the vast European market.

However, none of the changes were as significant as the Malta-based organization’s shakeup in its leadership structure. The gambling group’s then Chief Marketing Officer (CMO), Elen Barber, and its then Chief Commercial Officer (CCO), Anne-Jaap Snidjers, departed their roles in the fall. These departures were preceded by the resignations of Kindred’s long-term CEO, Henrik Tjarnstrom, and its Chief Finance Officer, Johan Wilsby.

The company suggested that those departures resulted from a review of the company’s marketing and commercial operations. We also saw the company announce that it would be cutting back on its North American workforce. This led to losses of more than 300 jobs as the company looked to save close to $50.7 million due to its subpar 2022 performance.

Besides its highlighted struggles in North America, Kindred’s position has also been far from appealing in Europe. As such, the company suffered a hefty 30% revenue decline in its most recently reported quarter. The downturn led to a temporary stop of its operations in the Netherlands and a complete withdrawal from the Norwegian gambling market.

Light at the End of the Tunnel?

The proposed acquisition of the Kindred Group by FDJ represents a beacon of hope for a company that has been grappling with the ghosts of 2022 for a year now. Its share price has shot up by 16% since the announcement of the FDJ bid. FDJ’s stock, on the other hand, received a 3.9% boost. From the transactional details, the possible acquisition will take an all-cash tender offer that will unfold for a maximum period of nine months.

Nils Anden’, the present CEO of Kindred, voiced his enthusiasm for the planned acquisition in a statement:

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“I’m delighted with today’s transaction announcement between FDJ and Kindred, creating a leading European gaming operator with the financial and strategic capabilities to further expand its global footprint. I believe that by combining with FDJ, Kindred can accelerate the delivery of long-term strategic prospects, continue to grow in core markets, and provide a trusted source of entertainment to customers.”

 

According to Kindred, the projected takeover won’t mean that its operations will be materially altered. That said, the company is moving forward with its exit from the Norwegian market and several other non-regulated markets worldwide. This is expected to have a significant impact on Kindred’s 2024 financials.