Super Group’s pending merger with Sports Entertainment Acquisition Corp. is a key step in expanding its global Betway brand, as the company continues to expand into sports betting markets, including the U.S., its executives say.
“The story [is] that Super Group is no longer this private, unknown business. For us, that’s very important in a time now where there are lots of markets going through regulations and lots of markets needing market partners at a global scale,” Neal Menashe, CEO of Super Group, said in a video call. “We have to be in play on the world scene for anyone to understand who we truly are, to get our true value. When opportunities do come up, some never would think of a private business because that’s an unknown business.”
The Guernsey-based Super Group reached a deal in late April with Sports Entertainment Acquisition reached to go public, valuing the business at $4.75 billion. The SPAC, led by former NFL executive vice president Eric Grubman and former NHL chief operating officer John Collins, will own 9.3% of the combined business, with another 2.3% owned by the SPAC sponsors, which include the executives as well as hedge fund veteran Chris Shumway and the investment bank PJT Partners. The balance—more than 88%—will remain in the hands of existing Super Group shareholders, primarily Martin Moshal, a South African tech entrepreneur.
Super Group generated $910 million in sales in 2019, mainly from sports betting and online casino operations, from which it made $55 million in earnings before taxes interest depreciation and amortization. Executives declined to state net income but said the company is profitable. Ebitda for the current year should reach $350 million on net gaming revenue of $1.5 billion. The companies are pursuing the merger, which will see Super Group take over Sports Entertainment’s New York Stock Exchange listing, without the need for private investment in public equity, or PIPE. PIPEs have been a way for SPACs to fund mergers that require more cash than the SPAC has available from its IPO or lessen or eliminate the possibility of shareholder redemptions spiking the merger. The PIPE market has largely dried up since spring, as institutional investors no longer see reasons to buy into deals early.
With a business that is profitable and debt-free, Super Group doesn’t have an immediate financial need to go public, added Menashe. The expertise of Grubman, who will become chairman of Super Group, and Collins, who will join the board of directors, made for an appealing partnership to help expand into the emerging U.S. sports betting market, Menashe explained.
Having Betway as the lone Super Group sports betting brand allows it marketing efficiencies that competitors don’t have, said Collins, also on the video call. “The fact that they are just a single sports brand, and therefore can amortize those relationships, I think is a huge strategic advantage,” he said. Other sportsbooks such as Flutter Entertainment have multiple brands, some specific to a region.
Super Group recently began striking deals to get the Betway brand better known stateside, including becoming the official sports betting partner of the NHL and inking deals with the Brooklyn Nets, among other NBA squads. More importantly, Super Group also has a deal in place to buy Digital Gaming Corp, the U.S. business that has gaming licenses in 10 states giving it local market access. The U.S. is an important market, but not the only one, since it will account for perhaps 15% of global betting in a few years’ time, notes Menashe. Super Group is in 23 countries already, and markets such as Latin America and Africa are expected to be strong growth regions too.
“If you don’t have access, you can’t be in that market or country,” said Menashe when asked the keys to Super Group’s growth. Secondly, “because we’re global with the Betway brand, when we do global marketing, we do it for the world. The NBA, the NHL, they aren’t just watched across America, they’re watched across the globe.” The company also sponsors West Ham United of the English Premier League, perhaps the most-watched sports league worldwide, and has made a recent push into esports, where viewers and potential bettors skew younger.
Once the company is able to get sports bettors to choose Betway, management is confident its technology and understanding of its customers will help it retain them. “We get a very quick understanding of each customer that comes into the ecosystem, based on our access to real-time data,” explained Super Group president and chief operating officer Richard Hasson, on the video call. “It goes back to giving every single customer a very personalized, very bespoke experience.”
So far, investors in the SPAC have been supportive, with Sports Entertainment shares up more than 5% since the deal was announced to $10.24, a relatively good showing for SPACs in today’s market environment. The company’s warrants, often a preferred method of trading on SPAC deals, have surged more than 134%, to $2.30, implying investors think the deal should bring at least another 30% in gains, based on the fact that warrants will be exercisable at $11.50.
“We are just beginning, and it sounds mad, that we’re just beginning, but it’s literally just beginning,” added Menashe. “It’s all about where you think sports betting is going long-term globally. Everything is going online, and we’ve been online [only] for 20 years.”
(This story has corrected the name of Digital Gaming Corp from Digital Gaming Group in the seventh paragraph.)