Exclusive: Betfair closes in on Blue Square Bet buy
Initial upfront sum will be paid with fee understood to be worth as much as £35m if loss-making sportsbook hits certain targets.
Betfair is understood to be close to acquiring rival Blue Square Bet for a sum that could amount to £35m if the loss-making Rank Group-owned sportsbook achieves certain future targets, eGaming Review can exclusively reveal.
According to a source close to the matter Betfair would initially pay a small upfront fee followed by a structured earn out with further cash dependent on future profits.
The source added that two senior members of Blue Square team have agreed to take redundancy rather than move to Betfair, however it is understood the majority of the existing team of 60 will join their new employers in the coming months. It is not known whether or not managing director Mark A Jones will remain in his position.
A Blue Square spokeswoman refused to comment on the basis the business is listed however another source close to the matter told eGR that Rank executives were known to be “close” to announcing further developments on the disposal of its 10 year-old sports asset.
A Betfair spokeswoman refused to comment.
On 10 January the Rank Group surprised the City by announcing it would “undertake a review” of its Blue Square Bet sports betting business following a sustained period of losses and that it was “unlikely to continue in its current form”.
At the time a source told eGR that Blue Square had been under “constant” review but that late last year Rank Group’s senior management team made a concerted effort to take the loss-making business to break-even point, however the action plan was “unsuccessful”, a spokesman explained.
Rank Group acquired Blue Square in 2003 in an effort to accelerate its development in online gaming and betting and the company rapidly became the vehicle for the online distribution of its gaming brands including its now more successful sister brand meccabingo.com.
In its results for the six months ended 31 December the Rank Group said Blue Square saw losses double to £4.8m following an increase in marketing spend, with chief executive Ian Burke calling the numbers “disappointing”. The group’s sports betting revenue fell 23.4% to £3.6m and was overtaken by revenue from games on the platform, which rose to £4m.
It is believed Betfair’s strategy for its new acquisition could be to employ Blue Square as the London-listed company’s fixed odds brand while maintaining the Betfair name for its core exchange product.
It is also thought this could mean using Blue Square as a secondary brand in other markets where Betfair does not operate.
Betfair has recently launched its new fixed-odds sportsbook to a select number of customers with a wider roll out as well as an increased number of events and a full range of markets on each event planned for the rest of this year.
In third quarter numbers announced yesterday Betfair revealed that its sports revenue rose by 39% to £7.5m compared to £5.4m in Q3 2012, largely due to strong margins following favourable football results.
The strong start from its sportsbook, however failed to prevent Betfair’s group revenues falling 4% year-on-year, down to £90.5m. This was predominantly down to its withdrawal from a number of grey markets including Germany, Greece and Cyprus, a move instigated by new CEO Breon Corcoran as part of his move to operate in purely regulated territories.
“The launch of our sportsbook will provide a simpler product experience, which should enable us to address a greater proportion of the recreational segment of the online market while offering our existing exchange customers more betting opportunities,” Corcoran said during yesterday’s results announcement.
The former Paddy Power COO has made a host of changes to the business since his arrival last August including implementing a scheme that aims to cut costs by £20m a year. Ther majority of this will come from a significant amount of redundancies at the company across mainly its marketing and IT departments.
The number is known to be in the hundreds with one internal source claiming it to be as high as 650 employees.
A source at the time said the redundancies were “in line” with the new CEO’s plans to move from investing in a cross-section of regulated and unregulated markets including emerging territories such as Latin America as well as areas where the company faces “regulatory risk” such as Greece, to a model of purely regulated and regulating countries.