Paddy Power owner Flutter Entertainment is actively considering submitting a bid to run Italy’s main lottery licence, after authorities formally pressed the start button on the process in recent weeks, according to sources.
The Italian Agency for Customers and Monopolies, which oversees gambling regulation, estimates the nine-year lottery contract will have a gross value of €4.3 billion, according to documents published this month.
It has set a minimum bid level at €1 billion for parties interested in country’s oldest lottery licence, which has been in the hands of International Game Technology (IGT), formerly known as Lottomatica Holdings, for the past three decades. The existing licence comes to an end in November of this year and IGT is expected to be among bidders vying for the next contract.
“The big question is if [Flutter] will go alone or try and partner,” said an analyst, who declined to be named. “A partnership model might make sense.”
Sources confirmed that Flutter was exploring the potential for a joint bid with another party, or wider consortium, as it looks at various options ahead of a bid deadline set for March 17th. No decisions have yet been made, they added.
Flutter’s Italian business, Sisal, uses its existing local lottery licence to win lottery customers over to its online gaming and sports betting platforms. While advertising online gambling is banned in Italy, Flutter can cross-sell these activities by allowing lottery customers to scan the back of their tickets. This is the main attraction of the main lottery licence to Flutter, according to sources.
“Clearly the Italian lottery licence would be a good strategic fit for Flutters portfolio given the cross-selling opportunities it would present,” said John Blake, an analyst with Cantor Fitzgerald Ireland. “Management, however, will likely remain financially disciplined in any bid process.”
The group moved in September to double down in Italy by agreeing a deal to buy the country’s third-largest online gambling company Snaitech from Isle of Man-based Playtech for $2.6 billion. This is expected to go through by the middle of this year. Folding it in with Sisal, which was bought in 2022 for €1.9 billion, would give Flutter a 30 per cent share of online betting in Europe’s biggest gambling market.
Just 21 per cent of the €21 billion of money spent on gambling in Italy in 2023 was spent online. The figure is more than 60 per cent in mature markets like the UK and Australia.
Flutter chief executive Peter Jackson signalled an interest in the main Italian lottery licence in a phone interview with The Irish Times in November, saying: “We don’t have to [bid], but if it makes economic sense, we’ll do it.”
A spokesman for Flutter declined to comment on the process.
The analyst said that a joint bid with a partner could offset some of the upfront capital cost of the bid, while allowing Flutter to use the licence to funnel customers into its Italian sports betting business.
“The more annuity cash flow piece from a lottery contract might be more attractive to another party,” the analyst added.
Italian reports say that IGT is widely expected to put in a bid for the next contract, which will run for nine years and entitle the concessionaire to a 9 per cent commission on turnover, up from 6 per cent on the existing contract. Ticket sales on the main lottery amounted to €8 billion last year.
While Flutter’s main focus in recent times has been on its fast-growing US business, FanDuel, the deal to buy Snaitech, and the group’s move to buy a majority stake in Brazilian betting company NSX Group to expand its operations in that market, show that remains interested in markets viewed to have strong growth potential.
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