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ASX-listed operator BlueBet confirmed today (11 April) it has entered into a binding asset sale agreement with Matthew Tripp-owned Australian brand Betr.

The deal will see BlueBet issue 265.4 million shares to Betr shareholders, representing around 56.9% of the combined entity prior to an upcoming A$20m equity raise.

The merger is scheduled to complete on 1 July 2024, provided that several different closing conditions are met.

Those conditions include approval from the Northern Territory Racing Commission and BlueBet shareholders, the successful completion of the equity raising, and BlueBet maintaining net cash balances of at least A$3m as of 30 April.

The combined business willl be led by current Betr chief Andrew Menz as CEO.

Meanwhile, BlueBet CEO Bill Richmond will become the company’s COO, while BlueBet founder Michael Sullivan (pictured right) will sit on the board as executive chairman, joined by Tripp as a non-executive director.

Tripp (pictured left) is then expected to take over the executive chairman role from January 2025.

Sullivan and Tripp are widely considered to be two of the major pioneers of the Australian online betting sector.

Sullivan sold Sportingbet to William Hill in 2013 for A$660m, while Tripp bought Sportsbet in 2005 for A$250,000 before selling it on to Paddy Power at a valuation of A$388m in 2011.

Merger rationale

Broadly speaking, the merger is intended to consolidate both brands’ customer bases while migrating Betr’s operations away from third-party technology supplied by Betmakers and onto BlueBet’s proprietary tech stack.

Betr boasts a large customer database of around 341,000 open accounts and more than 112,000 active customers, BlueBet said, which will afford “materially enhanced scale to BlueBet’s loyal active customer base” of around 67,000.

BlueBet sets out the key characteristics of Betr’s customer base

The migration of Betr’s operations onto BlueBet’s tech stack, meanwhile, is expected to drive greater customer engagement, retention and monetisation.

The companies also expect annualised cost synergies of around A$14m as a result of the merger, with the resulting improved scale and profitability allowing the combined entity to further invest in its product and customer experience.

BlueBet sets out the combined entity’s growth pillars

At present, the companies expect to transition their operations onto a single brand following a review, which will generate further savings in advertising and marketing.

Subsequently, the new business “will have the platform to drive further organic and inorganic growth with a focus on accretive M&A,” BlueBet said.

Equity raising

Under the deal, BlueBet is undertaking a full underwritten institutional placement to raise gross proceeds of around A$20m.

Those funds will be used to fund “growth initiatives of the combined business, transaction costs and one-off integration and migration costs.”

The placement comprises two tranches, with the first seeing the issue of 49.9 million new shares (worth A$0.21 each or around A$10.5m combined) in the business, using its existing placement capacity under ASX listing rules.

The second tranche of 45.3 million new shares (worth A$9.5m) must be approved by BlueBet shareholders at a general meeting of the company, which is expected to be held in or around May this year.

Both Tripp and Sullivan intend to participate in the placement, subscribing for around A$2m and A$1m worth of new shares, respectively, subject to approval by BlueBet shareholders.

After the placement, Betr shareholders are expected to own around 47.2% of the combined business, BlueBet shareholders 35.8% and incoming investors around 17%.

Q3 FY24 results and future outlook

Alongisde the merger announcement, BlueBet also provided an update on both its and Betr’s financial performance during Q3 of the financial year 2024 (three months ended 31 March 2024).

In Q3, BlueBet delivered A$15.9m in net win, up 32.5% year-on-year, from A$139.6m in betting volume, up 17.2%.

Betr, meanwhile, delivered A$23.3m in net win amid year-on-year growth of 55%, despite a 22.9% drop in betting volume to A$273.1m.

As for the combined entity’s future outlook, BlueBet said the business is expected to reach monthly EBITDA profitability during the first half of the 2025 financial year, and be EBITDA profitable for the whole of FY25.

Individually, BlueBet expects its Australian operations to be EBITDA positive in the second half of FY24, while Betr expects to be approximately EBITDA neutral in the same period.

There is an additional potential upside for the combined business, BlueBet said, which may be realised from optimal engagement of Betr’s customer base and an improvement in its net win margin (currently 8.5%) towards BlueBet’s (currently 11.4%).

Strategic review of US operations

The combined business will also undertake a strategic review of its US operations following the merger.

At present, BlueBet is active in the US with both B2C and B2B operations.

The operator’s B2C brand, Clutchbet, is currently live in Iowa and Colorado, while the business also offers a B2B sportsbook solution.

Following the merger, the combined business will be focused primarily on the Australian market.

No further B2C market launches are planned, while BlueBet said it has a “clear path to profitability” in each of its currently active B2C markets.

The business will also start delivering B2B revenue from the US in FY25, when its sportsbook solution goes live in Ohio.

With its sportsbook platform delivered in the US, however, there will be a “significant reduction in US expenditure going forward,” BlueBet said.

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