On Tuesday, Deutsche Bank raised its rating on La Francaise des Jeux SAEM (FDJ:FP) stock from Hold to Buy, while also increasing the price target to €42.00 from the previous €38.00.
The adjustment comes as the Online Gaming sector experiences a wave of mergers and acquisitions (M&A), which traditionally involve eliminating redundancies in technology and marketing, as well as cutting central overhead costs to boost profits.
Deutsche Bank highlighted that FDJ's approach to acquiring Kindred deviates from the typical M&A strategy seen in the sector. The €2.5 billion deal was made public on January 21st and is currently undergoing the French competition authority's approval process. The expectation is that the transaction will be finalized on November 19th, contingent on achieving acceptance from 90% of Kindred's shareholders.
The analyst from Deutsche Bank pointed out that the market has witnessed numerous takeovers and mergers, with companies often following a similar playbook. This usually entails stripping out overlapping areas in technology and online marketing, as well as reducing a variety of central overheads. The addition of revenue synergies often results in a substantial increase in profits for the consolidating entities.
FDJ's ongoing acquisition of Kindred represents a departure from this common pattern. The process has been described as slow-moving, with the acquisition still pending clearance from the French competition authority. The successful completion of the deal is predicated on the condition that it garners the support of 90% of Kindred's shareholders by the specified date.
The analyst's comments underscore the unique approach FDJ is taking with its acquisition strategy, as it navigates through the regulatory process. The market will be watching closely as the November 19th deadline approaches, to see whether FDJ can secure the necessary shareholder approval to finalize its acquisition of Kindred.
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