Will Kindred be FDJ’s perfect match?

When FDJ’s €2.45bn offer to acquire Kindred Group was announced in January, it seemed to come out of the blue.

But it wouldn’t have been a shock if you were familiar with FDJ’s 2020-2025 digital strategy, in which it committed to “diversifying its revenue sources”. This mainly focuses on bolstering its omnichannel capabilities and gaining a presence in new markets. In those contexts, Kindred feels like an answered prayer.

FDJ holds France’s monopoly for lottery, retail sports betting and scratchcards. As stated by the semi-public company itself, acquiring Kindred – one of the largest online gaming companies in Europe – will create “a European gaming champion”.

The French lottery operator hinted at seismic M&A plans during its Capital Markets Day in November 2022. According to Pallez, although Kindred may not have been in FDJ’s eyeline back then, this gave FDJ the opportunity to explain its reasons for seeking significant M&A opportunities.

“We explained why – based on the success that we have on our current businesses, which is lottery, of course, but also online betting and gaming – we thought that our strategy was to diversify and particularly to seize opportunities to become a truly international player,” she explains. “In this context, we’ve been looking at many opportunities that were present that could arise in our environment.”

And one such opportunity was Kindred. The acquisition process was only ramped up by Kindred’s confirmation of a strategic review – and potential sale – in April 2023.

Pre-emptive movements from FDJ and Kindred allowed FDJ to “enter into due diligence and to also enter into a direct dialogue with the management and shareholders of Kindred”.

Plans in place for some time

For a deal in the works as long as this one, it was bound to have a hefty price tag – €2.45bn to be exact.

This lofty valuation makes sense for what Kindred is bringing to the table. But it is still a whopping seven times more than FDJ spent acquiring Premier Lotteries Ireland (PLI) last year. PLI became the first foreign lottery operated by FDJ and has served to bolster its ambition to become an international B2C operator.

PLI is “a company that we know well, which has a lot of similarities with our lottery business that we exercise within exclusive rights in the French market,” Pallez explains.

“What we are doing is projecting ourselves as a group which is using its current experiences and assets to diversify and project this experience abroad.”

Pallez asserts that lottery will continue to be FDJ’s primary product offering, even after the Kindred deal has closed. But Kindred’s diverse offering, which spans slots, online gaming and sports betting, is not necessarily meant to slide into the lottery arrangement. Rather, it will give FDJ a whole new scope for operation.

“PLI is a way to use our experience on this segment of our activity and Kindred is definitely a way to increase and completely and drastically diversify our online and gaming business,” she continues. “Our strategy is to diversify and internationalise our activities.”

And it’s not just about reach. While Kindred has a significant presence in Europe, the quality of its products is also a standout feature for FDJ.

“Kindred is definitely one of the leading online betting and gaming operators, so it is a major asset to give us the necessary not only size, but also the necessary quality to be present in this online betting and gaming sector we have,” Pallez explains.

“We believe strongly that in order to be competitive and able to participate in the competitiveness and investment in this sector, you need again a certain element of scale and a number of critical assets.”

Fortifying FDJ’s presence in gaming

Kindred already has a significant presence in France through Unibet, one of its best-performing brands. And it’s making moves in technology and investments, too.

“[Kindred] is investing in a new sportsbook platform, KSP, which is one of the reasons we think Kindred also can bring a lot to us,” Pallez explains.

This particular investment by Kindred will be of keen interest for FDJ – it has just agreed to sell its B2B business Sporting Solutions, which it acquired in 2019. Forward-thinking investments coupled with a priority on responsible gaming was exactly the sort of thing FDJ was looking for.

“Kindred is best in class as an online betting and gaming operator in terms of responsible gaming,” Pallez emphasises. “We also believe strongly to be a sustainable and profitable operator in this business does require you to also to be best in class in terms of integrating responsible gaming within your marketing and relationship to your customers.”

A dynamic is forming here. Not only can Kindred offer FDJ its tried-and-tested brand success, but also a high potential for further growth – for example, in its sports betting and online gaming segments, where revenue grew 10.9% in 2023.

In the end, FDJ gets a stronger footing in the betting and gaming sphere.

“Highly complementary”

Pallez views Kindred as “highly complementary” to what FDJ already offers and it shows.

Considering France alone, things look to be a dead cert for FDJ and Kindred’s success in the market. But what about in the context of wider Europe?

It’s difficult to predict, Pallez admits. However, having an armoury of assets is a big bonus.

“Today the European market has been consolidating and is consolidating,” she muses. “If you want to be, in the medium term, a competitive player in this market you need to have the necessary size and quality of assets.

“I think Kindred will definitely create a European champion that will be able to be a part of this European market with the necessary size and quality.”

Kindred owns nine gaming brands, all of which are keen European players.

It’s not just about competing though. Snapping up Kindred creates an avenue for FDJ to implement two of its core principles – regulatory compliance and responsible gambling – on a wider scale.

“As we have announced, we will become the owner of the company [Kindred] and will operate it only in locally regulated markets,” Pallez explains. “Best in class in responsible gaming is also a major differentiation and major condition to be one of the leading operators in this domain.”

For a company as mammoth as Kindred, it’s fair to assume that planning a future as its new owner would be an intimidating task. But if Pallez is nervous, she doesn’t show it.

Focusing on diversifying FDJ’s reach and dedicating time and energy into Kindred’s further growth are priorities. Everything else will take care of itself.