With Française des Jeux (FDJ) completing its €2.5bn acquisition of Kindred Group, the French lottery giant is setting out on its road to become a “pan-European online gambling champion”.
But the mood music surrounding the industry has shifted markedly since it first announced its bid for Unibet’s parent company in January 2024, with the situation complicated by the fact that many of Kindred’s most important markets are on the cusp of significant taxation or regulatory overhauls.
As European governments implement policies to combat low economic growth and seek to raise revenues, major tax rises are on the cards in the Netherlands and, potentially, France and the UK, while Scandinavian markets like Sweden enact ever tighter regulations.
In France, the government finally decided against announcing its gambling tax hikes to the public last week, but the issues will be debated in parliament during the forthcoming discussions over the 2025 budget.
Further north, monopoly markets like Norway and Finland have announced plans to regulate online gaming, but those will not happen for at least two years and FDJ has made it clear Kindred brands will not operate in any market where online gambling’s legal status is unclear (in other words where it is illegal according to local regulations).
Still, for all its Scandinavian heritage, western Europe remains the key region for Kindred and in Q2 accounted for 65% of its revenues, which were up 7% to £328m as EBITDA rose 32% to £74m.
Western Europe central to FDJ-Kindred fortunes
Of course France will be a key target market, and with around 23% of joint market share, just below the level where France’s competition authority could realistically object to the merger on antitrust grounds, the newly-formed entity can look forward to consolidating its top 3 position in the market behind Betclic and Winamax.
The Benelux region is of major interest to the group and by all accounts Kindred via its Unibet brand leads the Belgian market. In the Netherlands however it has gone from around 25% share and being clear market leader in 2021 to joint-leader with Bet365 with around 18% share.
Most industry observers say Kindred’s decision to not get licensed for the market’s regulated launch three years ago was a key mistake as it enabled the UK operator to make up significant ground during the 10-month period Unibet was out of the market.
Nonetheless, those markets all performed well in Q2. Kindred said Holland GGR was up 17%, and “alongside return to growth for both France (+41%) and Belgium (+12%)”, drove “the overall growth of the Western European region” in Q2.
FDJ added that as a combined FDJ-Kindred entity the group would have recorded GGR of €1.9bn and underlying EBITDA of €490m in H1 2024.
Growth by M&A?
For FDJ, the deal is important and, as mentioned, plays a key role in consolidating its podium position in online sports betting in its home market. The acquisition also enables the group to see its share of online gaming revenues rise from around 4% of total revenues to around 27%.
But, as Regulus Partners noted in January when the deal was first announced, the more surprising statistic was that FDJ generated “only c€250m” of online revenues from “genuinely open competition” prior to the acquisition of online horse racing tote group Zeturf in 2023.
Prior to the Kindred deal, FDJ had “a desultory c11% market share in the competitive French online market despite a strong brand, ubiquitous distribution, lottery cash flow, and a land-based betting monopoly”.
… and online casino
The other key vertical that comes as part of the deal of course is online casino. Its gross win was down 2% in Q2, which Kindred said was due to the closure of its North American operations. However, it brings established B2C brands like 32Red and Maria Casino to the table and its B2B games provider Relax Gaming was up 10%.
In addition, despite online sports betting driving most of Kindred’s Q2 growth, digital casino demonstrated its profit-generating value by accounting for 53% of the group’s gross win revenues compared with 43% for sports wagering.
Casino wars
Somewhat inevitably, mentioning the new online casino options that Kindred brings to FJ and the full product portfolio it benefits from in its home market gets French gaming executives’ backs up. This is because on top of its OSB brand ParionsSport and digital lottery operations, it also offers French players online bingo and scratchcard products.
Including a reference to the “near nailed on” decision by the country’s competition watchdog Autorité de la Concurrence to green light the Kindred buyout, one industry contact told SBC: “How the competition authorities can say with a straight face that Europe’s largest lottery group, already a top four online bookmaker in France, can acquire one of the other top four online bookmakers in the market and it doesn’t raise serious competition issues is baffling.
“And even if the AdC’s decision was never in doubt, it’s worth remembering that FDJ operates 30,000 retail outlets, has already acquired ZETurf, the only online tote horse racing company that had any semblance of competitiveness to PMU, and is allowed to operate exclusive online verticals like bingo in France.”
Online Riches
Mention of online casino also brings up the thorny issue of regulating the vertical in France. On top of Kindred enabling FDJ to hit the ground running should it be legalised, the lottery group has a key role in the debate because it holds so much sway over how regulations might evolve (or not). And while the country’s casinos and online betting operators call for regulation, there is little sign of any movement currently as unregulated operators (in both casino and sports betting) make hay.