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Apollo Global Management (NYSE: APO), CVC Capital and Bain Capital, are said to be the final bidders competing for the buyout of Italian gambling company Sisal Group SpA, owned by private-equity funds Apax Partners, Permira and Clessidra Capital Partners. Milan-based Sisal is the second largest gaming company in the Italian market, celebrating its 70th anniversary. The group operates in the gaming and betting market with a full spectrum of products in retail and online channels, with over 1,900 employees and a network of more than 45,000 points of sale. Founded after WWII, Sisal begun a diversification plan in 2002, which allowed it to strengthen its position as one of the leaders in the payments and services market. Apax and Permira (formerly known as Schroder Ventures Europe), acquired a controlling stake in Sisal in 2006, with Clessidra taking a 20% stake, while Apax and Permira took each a 36.5% stake, in a deal that reportedly valued the company at about €900 million including debt. In October 2013, Sisal’s private equity owners started to evaluate a possible IPO with their advisers Deutsche Bank AG (NYSE: DB) and UBS Group AG (NYSE: UBS), at a €1.7 billion enterprise value. However, in July 2014, after starting an IPO roadshow that would have valued the company at €1 billion, Sisal’s owners and their investment bankers decided to call off the IPO due to adverse market conditions. Deutsche Bank and UBS were given the mandate to advise Sisal’s private equity sellers on the current M&A assignment. According to Corriere Della Sera, the selected potential bidders for the Italian gaming group led by CEO Emiliano Petrone were given access to due diligence documents a few weeks ago, and are expected to submit their binding offers by May 15. Last year, MF Milano Finanza also reported an interest in the dossier by US private equity firms Blackstone Group (NYSE: BX) and Carlyle Group (NASDAQ: CG), and European private equity house PAI Partners. The online gambling sector offers growth opportunities for European gaming companies in 2016-17 versus traditional brick-and-mortar operations, despite likely pressure from increasing taxes and regulation, says Moody’s Investors Service. In recent years, online gaming markets — like online poker, casino, sports betting, bingo, lottery — have grown rapidly to €36.9 billion in 2014 from approximately €6.6 billion in 2003, and are expected to grow to approximately €42.8 billion by the end of 2018, says Moody’s. “Gaming companies with a larger online presence are likely to see higher revenue and EBITDA growth over the next 12-18 months than those more focused on traditional land-based business, as the gradual shift online continues, mobile phone and tablet penetration rises, and fast-growing demand for online games increases,” said Moody’s vice president and senior analyst, Donatella Maso. “Sports betting contributed substantially to Sisal’s revenues (in 2015), with the Italian market growing by 24.7 percent compared with 2014,” said gaming industry analyst Joss Wood. “The March (2016) revenue figures issued by regulator AAMS show Sisal ranked fourth for online sports betting with monthly revenue of €23.4 million ($26.8 million).” UK-based William Hill Plc has the biggest online exposure by revenue, while pure online operator Sky Bet (Sky Betting & Gaming) has the most significant presence by percentage of total revenue. Conversely, Ladbrokes Plc is one of the largest gaming companies in the UK but its digital division still lags its peers and it reported negative EBIT in 2015, according to Moody’s. While SNAI SpA’s revenues have surpassed Sisal’s following its acquisition of Cogemat SpA and it has gained leadership positions in retail sport and horse betting, “Sisal will remain more profitable mainly due to its more favorable product mix,” Maso said. SNAI is Italy’s second-largest gaming company after International Game Technology. SNAI is also the leader in sports and horse betting and the third-largest concessionaire of amusement with prize machines and the second-largest of video lottery terminals by turnover. Sisal is second in lottery but lacks leadership positions in its other market segments. However, Sisal remains more profitable than SNAI and also better diversified in terms of products and services. The online sector’s fundamentals are expected to remain positive for at least the next two to three years, which will support high single-digit growth rates despite regulatory and tax pressures. Potential legalization of online gambling or further liberalization of the rules that already govern it in some European markets and US states offer growth opportunities for large online gaming operators, which could offset uncertainty in regulatory regimes. Europe, in particular, continues to see the creation of an increasing number of new regimes that permit licensed and regulated betting, notably through interactive platforms, and which is gradually removing the once dominant monopolistic approach favoring the lottery sector, according to the European Gaming & Betting Association (EGBA). The continuing growth of professional sport and associated betting markets on a global scale, as a direct result of consumer demand driven by technological advances, has provided both business sectors with clear fiscal benefits and further strengthened their symbiotic relationship, says the EGBA. This has manifested itself in a range of mutually beneficial commercial ventures through direct sponsorship of sporting events, sportspeople and clubs, along with numerous indirect benefits to both products from media advertising deals around sport (where legislative frameworks permit). The recent wave of M&A is likely to continue as operators look to become bigger and more diversified to offset rising costs and compete more effectively. Operators will also increasingly look to develop technology platforms in-house, such as William Hill’s Project Trafalgar, to limit their reliance on third-party providers and reduce customer acquisition and marketing costs, Moody’s added. Given Bain Capital founder Mitt Romney’s strong public opposition to online gambling, citing “social costs and people’s addictive gambling habits,” it’s not clear how far Bain would actually go with a bid for Sisal. On the other hand, Apollo and CVC have recently been active investors in the sector. In June 2015, Apollo’s portfolio company AGS, a leading supplier of slot machines and live table games, acquired Cadillac Jack from Montreal-based Amaya Gaming Group (NASDAQ: AYA)  for $382 million. Cadillac Jack is a leading designer and supplier of electronic games and systems for the regulated global gaming industry with more than 13,000 units installed in hundreds of casinos across the United States and Mexico. Separately, Apollo and TPG Capital have struggled for years to salvage a $31 billion gambling bet on troubled Caesars Entertainment. Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston,Chicago, Bethesda, Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong and Shanghai. Apollo had assets under management of approximately $170 billion as of December 31, 2015 in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. A few weeks ago, CVC Capital acquired a majority stake in German gaming company Tipico for close to €1.5 billion ($1.68 billion). In December 2014, CVC acquired Sky Betting and Gaming for £800 million, consisting of five core brands Sky Bet (sports betting), Sky Vegas (online in-browser casino), Sky Casino (premium online casino, live table games), Sky Poker (online poker) and Sky Bingo (online bingo). CVC also made previous investments in British sports betting operator William Hill (2002 IPO exit, at 314% ROI) and the IG Group, a digital trading and betting platform. [caption id="attachment_431698" align="aligncenter" width="1024"]Bernie Ecclestone, CEO of Formula One Group, with Donald Mackenzie, Co-Founder and Co-Chairman of CVC Capital Partners (L-R) Bernie Ecclestone, CEO of Formula One Group, with Donald Mackenzie, Co-Founder and Co-Chairman of CVC Capital Partners.[/caption] CVC Capital also gained control of the Formula One Group in 2006 in a leveraged buyout funded with two loans – $965.6 million from its Investment Fund IV and $1.1 billion from RBS, turning the firm into the biggest winner in the history of the Formula One grand prix, a popular segment of the sports betting market. Over the past decade CVC has halved its stake to 35% and reaped a $4.4 billion reward. That has given it a 351.8% ROI and its remaining 35% stake controls the voting rights of F1’s Jersey-based parent company, Delta Topco. “This gives the stake a valuation of up to $8 billion – and if CVC achieves that price, it will push ROI to over 1,000%, making it the most profitable deal in the investment house’s 34-year history, says The Guardian, adding that CVC “made more from F1 than any other owner in the sport’s 65-year history, including Bambino, the family trust of its chief executive, Bernie Ecclestone,” Headquartered in Luxembourg, CVC Capital Partners is one of the world’s leading private equity and investment advisory firms. Founded originally in 1981 as the European arm of Citicorp Venture Capital, the CVC Group today employs some 300 people throughout Europe, Asia and the US. The firm was spun out from Citicorp in 1993, as an independent private equity firm. The CVC team’s local knowledge and extensive contacts underpin a proven track record of over 30 years of investment success. CVC manages capital on behalf of over 300 institutional, governmental and private investors worldwide, having secured commitments of more than US$71 billion in private equity, credit and growth funds. Sisal Group’s History sisal_history]]>