In a move that signals some of the difficulties in entering the US online gambling market, iGaming and sports betting firm GAN Limited announced it has entered into a preliminary agreement to be acquired by gaming machine manufacturer Sega Sammy Creation.
Sega Sammy Creation bought all of GAN’s ordinary shares at $1.97 per share, which is around 120% higher than where the stock closed the day before the acquisition announcement.
Seamus McGill, interim CEO at GAN, said in a GAN press release that the acquisition gives the company the capital it needs in what has turned out to be a harder-than-expected journey in the US online gambling and sports betting markets:
“After a thoughtful review of value creation opportunities available to us, we are pleased to have reached this agreement with SSC.
Market share concentration in the US B2C space, a slower than expected adoption of regulated online gaming in the US, along with changes to key customer contracts make the near-term operating environment challenging without ample capital resources.”
GAN struggles reflect a competitive US online gambling market
McGill’s explanation of why GAN wants the acquisition brought to the forefront two truths about the American gambling market.
First, FanDuel and DraftKings dominate every state sports betting market they operate in. The two companies often account for at least 80% of a state’s handle and revenue.
That type of concentration makes it incredibly difficult for smaller companies like GAN to capture meaningful market share.
Second, lawmakers have been painfully slow in their adoption of online casinos. Only six states offer it legally. Three of those states have strong markets: Michigan, Pennsylvania and New Jersey.
If GAN was betting on the US online casino market expanding at a reasonable pace, they were wrong. The two factors have led to a shortage of capital, a problem that the Sega Sammy Creation acquisition can solve, McGill said.
“Sega Sammy has those [capital] resources and GAN is a strategic complement to their existing gaming portfolio,” McGill said. “We believe this all-cash offer, at a substantial premium to recent trading prices, is the value-maximizing path for our shareholders.”
Where does GAN go from here?
GAN will be a wholly owned subsidiary of Sega Sammy Creation if the acquisition goes through. That means that GAN will likely carry on its current partnerships with:
- Boston Harbor
- Island View Casino Resort (Mississippi)
- Oaklawn Racing Casino Resort (Arkansas)
Whether or not GAN launches operations in Nevada was an issue the company did not address in its acquisition announcement.
The acquisition process will be a relatively long one. Now that GAN made the announcement, the company’s shareholders have until March 31, 2024 to approve or reject the merger.
If shareholders approve the acquisition, GAN estimates the merger will close during the fourth quarter of 2024.