Posted on: November 3, 2023, 03:28h.
Last updated on: November 3, 2023, 03:28h.
With its share of the US live dealer market slipping, Evolution Group (OTC: EVVTY) could participate in industry consolidation either as a buyer or seller.
That’s the take of Eilers & Krejeck Gaming (EKG), which noted in a new report the Swedish company is finding the US to be a tougher market amid escalating competition — much of it attributable to Aristocrat Leisure.
The problem looks to be more on the slots side, with Evolution saying at its recent Q3 results it was still growing in North America live casino but not random number generators (RNG),” according to EKG. “The European powerhouse has previously looked to buy its way out of potential problems (see Ezugi in early-stage live casino in the U.S. or NetEnt in Europe and Asia).”
The research firm noted International Game Technology’s (NYSE: IGT) internet business could be an idea for Evolution if it’s looking to bolster market share via acquisition, but EKG also questioned whether or not it could be “Evolution’s turn to look like a takeout target?”
IGT Unit Plausible Target for Evolution
IGT announced in June that it’s mulling strategic alternatives for its global gaming and PlayDigital units, so it’s not unreasonable that Evolution might consider an offer for the seller’s online arm.
In September, reports surfaced that Apollo Global Management (NYSE: APO), among other unidentified suitors, is kicking the tires on IGT’s global gaming business. A combination between Evolution and IGT in the live dealer space would create a behemoth as the two companies are the leaders as measured by gross gaming revenue (GGR) by supplier.
However, both are struggling with declining market share, potentially stoking concern among investors that “two wrongs don’t make a right.”
“Evolution is still top with a 21% share, but that is down significantly from 28% in October last year,” added EKG. “IGT has also seen its share decline in that same period from 22% to 17%.”
Evolution Likely More Buyer than Seller
With a market capitalization of around $19 billion, Evolution is likely more buyer than seller. Beyond Aristocrat and perhaps private equity firms, the pool of potential suitors for the Swedish company is shallow. Additionally, there are some moving parts involved in a potential takeover of Evolution that could make such a transaction unattractive to prospective buyers.
“But Evolution would probably need to break off its Asian and gray market operations to make that work and the only option that feels viable beyond that is private equity money that would presumably look to do a similar restructuring job,” observed EKG.
Still, analysts expect that the iGaming space, including live dealer concepts, is ripe for consolidation. It’s possible that an uptick in mergers and acquisitions in the industry could compel Evolution to bulk up through acquisitions to ward off unwanted advances.
