Analysts say Neteller is ripe for takeover 31/01/2008

Scott Longley

With a market-leading position, exceptional growth prospects and having concluded negotiations with the US Department of Justice (DoJ), payment processor Neteller could be the likeliest takeover target this year, according to a new report on the gambling sector by analysts at Daniel Stewart.

James Hollins suggests the “key issue(s)” for investors in the gambling sector is to focus on the potential organic growth outperformance, the likelihood of corporate activity and whether there is a chance of cash returns on investment either through dividend yield or share buybacks.

When it comes to online, Hollins suggests “brand power, cost-effective marketing and targeted geographic expansion” are key factors in judging a company’s ability to outperform its peers.

The report adds: “With the player pool having shrunk considerably for listed players that had to walk away from player and cash liquidity generated by US punters, Europe and Asia have, without exception, become the ‘new’ targets for player acquisition.”

Hollins suggests the established brands will continue to grow strongly, “although incumbents with no historic US exposure continue to feel the pressure from operators focusing more heavily on European expansion”.

Looking ahead to this year, Hollins points out that though private equity interests might be attracted by the material cash flows generated by mature UK operators, or potential growth online, the regulatory risk will remain as an obstacle.

He concludes: “We see the sector as ripe for consolidation in the long-term, although deals may be delayed prior to further clarity on regulatory issues, most notably whether deals can be struck by operators with the US DoJ to negate exposure to US indictment.”

For more on the report see the next issue of eGaming Review.

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Posted: 31/01/2008