(AsiaGameHub) –   As Spanish gaming firm Codere is said to be on the market, M&A specialist Christian Tirabassi anticipates several major gambling companies might compete to acquire it—though private equity firms are the most probable purchasers.

Per a report by Spanish publication Expansión, Codere is being offered for sale at a value exceeding €2 billion (equivalent to $2.3 billion). The goal is said to be finalizing a purchase deal before the August summer break.

The transaction is also said to include Codere Online, the group’s digital arm that operates mainly in Spain and Latin America.

Tirabassi—founder and senior partner at M&A consultancy Ficom Leisure—describes Codere’s sale as “very much a private equity opportunity.”

That said, he also notes that several global gambling behemoths might throw their hats in the ring for Codere, even though he doesn’t identify any “obvious natural buyer.”

“Lottomatica will check it out, DraftKings will look into it, Entain will explore it,” Tirabassi tells iGB. “This is a deal for the major players, as it opens doors to multiple markets.”

Tirabassi’s views align with those of Ed Birkin, managing director of H2 Gambling Capital, who told iGB on Wednesday that he considers Allwyn International or Flutter Entertainment the most probable buyers, with private equity as another viable choice.

Is Codere’s €2 billion valuation too steep?

Birkin stated that the proposed €2 billion valuation for Codere might put it beyond the reach of most operators not in the top tier.

Tirabassi also thinks the figure is too high, but he posits that the leaked price is an intentional strategy.

“Look, this is public relations,” Tirabassi goes on. “They obviously leaked the details to establish the price in the market. I don’t buy it.”

“To give you context, we have a thorough grasp of every market they operate in, their revenue in each, and their capital expenditures. There’s no way to justify the valuation that was cited.”

Codere urgently needs investment

Codere is owned by around 84 investment funds, and Tirabassi notes that this sale process is clearly a result of the owners ending up in an unforeseen situation.

“Obviously, the bondholders or debt holders became owners of Codere without actually wanting to,” Tirabassi clarifies. “They never anticipated being shareholders of this firm.”

“So, they likely tried to figure out what to do with it. They realized it wasn’t their cup of tea, so they put it up for sale. It’s that straightforward.”

This lack of interest has resulted in a critical shortage of investment in Codere, leaving the business what Tirabassi calls “fatigued.”

Tirabassi says Codere is currently like a “ship without a compass or anyone at the helm.”

“It’s underinvested and undercapitalized, and now it’s struggling due to competition in every market it operates in,” Tirabassi states. “The business needs someone with a clear strategic plan to revitalize it.”

“It needs a lot of attention, capital, and a roadmap. Everywhere you look, it seems like no one has invested any money into it—like everything has been stuck in time for five years.”

Codere still has value to unlock

Even with Codere’s challenges, Tirabassi believes there’s still an opportunity to generate value in the business—provided substantial investment is injected.

This suggests it could draw interest from gambling operators, as the acquisition would be worthwhile even with the associated “headaches.”

“There’s no doubt that a lot of value can be created moving forward,” Tirabassi asserts. “They operate in all segments except lottery, and in theory, they have a unified digital brand.”

“So, this could be attractive to anyone looking to establish a strong presence in Spanish-focused markets, and their Italian operations are also quite robust, even in a competitive landscape.”

While much of the gambling industry is shifting more toward digital, Tirabassi notes there’s still a genuine demand for businesses that are mainly land-based.

“First off, land-based operations are profitable— that’s obvious,” he adds. “It does need to be streamlined, and the chain of control needs to be integrated, but it’s a money-making business.”

“Second, if you effectively combine digital and land-based operations, it’s a very strong offering. It works exceptionally well. It also shields you from additional advertising restrictions. When you have land-based presence, you’re naturally less concerned about ad limits—which I think will keep popping up in many markets.”

Will Codere Online be part of the sale?

But Tirabassi also points out that omnichannel offerings need to maintain various synergies to stay profitable—a key area where he believes Codere is significantly deficient.

A large part of the response to Codere’s sale news stemmed from reports that Codere Online would be included in the transaction.

Codere Online was spun off in 2021 and listed on the US Nasdaq exchange, though Codere Group still holds a majority stake.

Tirabassi insists Codere Online must be part of any deal, stating: “Today, Codere is essentially two separate entities with distinct profit and loss statements. They collaborate via a commercial agreement, but it’s not effective.”

“The decision to carve out the digital arm was, in my opinion, very odd—if not outright ill-advised—from the start.”

“Obviously, it has to be part of the package. And I’m certain the seller wants to highlight the digital component to boost the valuation multiple—even if I’m not sure how many buyers will buy into that. That’s exactly what I’d do if I were the seller.”