Flutter Entertainment will expand into the newly-regulated market of Brazil after agreeing the acquisition of a majority stake in a local operator.
The Paddy Power owner told investors it will acquire a 56 per cent stake in Brazilian betting firm NSX Group for around $350million (£266million), as it looks to capitalise on impending regulation in the Brazilian Market.
Dublin-based Flutter, which is the world’s largest online betting firm that also owns Betfair, said it will merge its existing Brazilian business with NSX in return for a majority stake in the new business.
Market expansion: Flutter Entertainment hopes to cash in on the soon-to-be regulated market in Brazil
Flutter will have an option to increase its shareholding via a put/call arrangement in year five or year 10 after completion.
This gives shareholders the right to sell shares at a pre-agreed price, and for Flutter to buy shares on pre-agreed terms.
NSX Group, the fourth largest betting firm in Brazil, operates a number of brands, including flagship brand Betnacional. Flutter said the firm is expected to generate $256million in revenue and adjusted EBITDA of $34million in 2024.
Flutter’s Betfair business in Brazil Flutter’s is projected to deliver revenue of $70million in 2024.
The Brazilian betting market is set to become fully regulated in 2025, after sports bets were first made legal in 2018. NSX entered the market in 2021.
Shore Capital analyst Greg Johnson said Flutter’s expansion into Brazil ‘is not a surprise’ given ‘the size of this fast growing and newly regulated market’, but noted Flutter Brazil would likely slump to a 2025 loss of up to $100million.
He added: ‘We see this as a sensible move, further expanding and accelerating its growth profile, consistent with its expansion profile and medium-term leverage ratios, albeit it will likely limit EBITDA growth (ex-US) next year.’
Flutter said it expects a loss of between $90million and $100million in 2025 as a result of the acquisition but said it ‘embed future profitability through disciplined customer investment’, and that its new Brazilian operation will be able to take advantage of the growing Brazilian market.
NSX currently holds a 12 per cent market share in Brazilian sports betting and 9 per cent of the online market.
Peter Jackson, Flutter’s chief executive, said: ‘I am excited to announce the addition of NSX, operator of Betnacional a leading Brazilian sports betting and iGaming brand, to the Flutter portfolio.
We believe that combining the extensive local expertise of the NSX team, our existing Betfair business and the power of the Flutter Edge, will create a compelling opportunity to capitalize on the growth opportunity in Brazil which presents an exciting runway of future growth.’
Earlier this year, Flutter moved its primary listing from the London Stock Exchange to New York, also setting up an operational headquarters in the US city.
The shift was partly due to its FanDuel division delivering the largest share of its revenue, while US markets also offer access to deeper capital pools. Prior to 2018, sports betting in the US was banned in all but a few states and has now exploded in popularity.