FDJ on Track To Become Europe’s Gambling Leader

The French gambling operator, La Française des Jeux (FDJ), is aiming high in its plans to become one of the most formidable entities in Europe’s online gambling market. A possible $2.5 billion acquisition deal is on the horizon involving the Kindred Group, a prominent European online gambling company. On Monday morning, Kindred’s board stated that it “unanimously” recommended shareholders take the all-cash offer from the FDJ.

According to Kindred’s CEO Nils Andén, “I believe that combining with FDJ, Kindred can accelerate the delivery of long-term strategic projects, continue to grow in core markets, and provide a trusted source of entertainment to customers.”

The FDJ’s ambitions are fueled by its vision to go global, diversify profit centers, and match up against larger rivals such as Entain from the U.K. and Dublin’s Flutter Entertainment. The company is known for its monopoly over France’s lottery and offline sports-betting sector, but its interests extend into the realm of online sports betting and online gambling as well.

FDJ, listed in Paris, has seen a recent 6% surge in profit, touching nearly €1.3 billion ($1.4 billion). The lottery business is credited with this hike. In November, FDJ made a significant move by acquiring Premier Lotteries Ireland, Ireland’s national lottery operator, for a hefty amount of €350 million. This acquisition was inclusive of debt.

Meanwhile, Kindred, if successfully acquired, will boost FDJ’s sports betting and online casino operations across other European territories. These include Italy, France, the Netherlands, Sweden, and the U.K. and would even extend FDJ’s reach to Australia.

Kindred has been under the watchful gaze of Corvex Management, a New York-based activist investor group. Corvex, a major Kindred shareholder possessing a 15% stake, made an initial stake in April 2022. The firm has been advocating for Kindred to consider a sale to pump up the company’s share price. This suggestion came in the wake of a substantial dip in Kindred’s stock price due to a 30% slide in quarterly revenue. The setback was attributed to the company’s decision to halt services in the Netherlands temporarily.

Corvex has been steadily increasing its position over the past months, even securing a place on Kindred’s board to push for significant changes. Gambling stocks in Europe have been performing poorly, making them an easy target for activists like Corvex.

Back in December, Corvex disclosed a stake of over 4% in Entain due to a low stock price, recommending that the company explore all avenues to enhance its value. In a strategic move in January, Entain brought Ricky Sandler, CEO of activist investor Eminence Capital, to its board.

FDJ’s potential acquisition could significantly alter the landscape of the European online gambling industry and position the company as a heavyweight in the sector.