French lottery operator La Française des Jeux (FR:FDJ) has offered to acquire Stockholm’s gambling operator Kindred Group for approximately $2.5 billion, as per a Wall Street Journal report. FDJ aims to capture a larger chunk of Europe’s online gambling market and secure a leading position through the acquisition. Details of the deal could be announced today after both companies finalize their talks. Kindred has confirmed the receipt of a cash takeover offer from FDJ.

FDJ is France’s national lottery operator. Once government-owned, FDJ became a listed company in 2018. FDJ also offers online/offline games and sports betting services and sponsors two professional cycling teams. FDJ shares have lost over 14% in the past year.

Meanwhile, Kindred Group is a Stockholm-listed online gambling operator boasting nine famed brands. Kindred also offers online casino, poker, bingo, and sports betting services. KIND shares have gained over 3% in the past year.

Here’s How Kindred Can Help FDJ’s Ambitions

Acquiring Kindred suits FDJ’s ambitions of diversifying its revenue sources and becoming Europe’s largest gambling operator with international reach since Kindred has operations in over 100 countries, including the U.S. It would increase FDJ’s revenue sources due to the addition of casino and poker businesses.

The Kindred deal would expand FDJ’s gambling services in major European countries, including the U.K., France, Italy, Netherlands, and Sweden as well as in Australia. It would also help FDJ to better compete with bigger European rivals, including U.K.’s Entain plc (GB:ENT) and Dublin-based Flutter Entertainment (GB:FLTR). FDJ also acquired Premier Lotteries Ireland, Ireland’s national lottery operator, in November 2023 to expand its operations in the nation.

Meanwhile, one of Kindred’s largest shareholders, Corvex Management, has been pushing the company to consider strategic alternatives to boost the share price. New York-based activist investor Corvex has steadily increased its stake in Kindred to 15%, earned a board seat, and will be one of the biggest beneficiaries if the sale goes through. In November last year, Kindred announced a withdrawal from the North American markets by mid-2024 to focus on Europe and improve its bottom line. Corvex also has a 4% stake in FDJ’s rival Entain.

Is FDJ Stock a Buy, Sell, or Hold?

On TipRanks, FDJ stock has a Hold consensus rating based on one Buy, one Hold, and one Sell rating. The La Française des Jeux share price target of €34.27 implies that shares are fully valued at current levels. Please note that these ratings were given before the acquisition news and could change meaningfully once analysts review their stance.

Disclosure