Roxy deal "ticked all the boxes", says 32Red chief

32Red chief executive Ed Ware said his firm’s acquisition of Roxy Palace “ticked all the boxes” and admitted the operator’s appetite for taking on grey market revenues had increased since the introduction of the PoC tax.

Speaking to eGaming Review shortly after 32Red announced the £8.4m deal, Ware said the acquisition made sense on a number of levels, including the appeal of a simpler integration process with both firms on the Microgaming platform.

The deal also hands 32Red additional international revenues as while Roxy generates approximately 50% of its business in the regulated British market, around 20-25% of revenues are derived from the unlicensed markets of Netherlands and Scandinavia.

Ware said he was “comfortable” with the small amount of unlicensed revenues his firm had gained and explained the operator had recently reconsidered its approach to such markets.

“Has our appetite for risk increased? The short answer is yes,” Ware said.

“That said, while this deal brings with it a bit more international income, I wouldn’t describe it as ‘risky’ and we are still a million miles away from accessing black markets,” he said, adding that the firm would apply for a permit for the soon-to-be-regulated Netherlands should conditions prove to be commercially viable.

However, the UK remains 32Red’s prime focus and following the deal the firm will hold around 5% of a market which Ware said offered “plenty of headroom” for both the Roxy and 32Red brands.

32Red will work with Roxy’s senior management team in order to maintain its performance marketing strategy, which Ware said had been successful in establishing good search rankings, although had yet to decide on any above the line marketing.

The chief exec also said the operational expertise developed by 32Red in recent years would see it squeeze more out Roxy’s 230,000 registered customers.

“We’ve come a long way in the last couple of years in terms of how we market to our customers and the development of our predictive modelling, and that’s enabled us to make a huge difference to our existing database,” Ware said.

“When we apply that science to our Roxy database in due course, I think it will have a significant impact on numbers coming from that brand,” he added.

Roxy’s net gaming revenues in 2014 amounted to £10.1m, which when added to 32Red’s figure of £32.1m means the acquisition has seen 32Red grow by roughly a third before any synergy benefits.

Meanwhile, Roxy’s EBITDA in 2014 was £1.6m and analyst Ivor Jones at Numis Securities estimated the brand would contribute £0.5m to 32Red this year and approximately £2.5m in 2016 making total EBITDA £8.5m for the company next year.