2019: A Year in Review By Andrew Tottenham, Managing Director, Tottenham & Co January 2, 2020 at 2:53 am A great deal happened in 2019 and trying to write about all of it is too big a task. But I have highlighted some of the events that took place, which should give a flavour of what happened in the past year. Mergers and Acquisitions In 2019, most major economies saw tepid growth, which led operators to look elsewhere for opportunities to increase revenues and profits. The big event of the year in the land-based casino sector was the takeover, still subject to regulatory approval, of Caesars Entertainment by Eldorado Resorts. Whilst this it ostensibly about two US companies, some of the fallout has already been felt elsewhere in the world. Tom Reeg, Eldorado’s Chief Executive, announced that the combined company would focus on its US operations. That led to Caesars withdrawing from the process in Japan to gain one of three integrated resort licences. Caesars also not to bid for the new casino resort in Hellinikon, Athens, where Caesars had done most of the running; it was said it was theirs to lose. There is also a question mark over Caesars’ UK-based operations. Caesars, or Harrah’s as it was then, acquired the company London Clubs as a platform for international growth. The 2008 financial crisis and a badly timed buy out put paid to those plans. Since then, London Clubs, or Caesars UK as it is now known, has been something of a poor stepchild, starved of interest and investment. The company recently sold the Emerald Resort and Casino in South Africa and there have been a number of interested parties who have made offers for the balance of the business: eight casinos in the UK and three casino management contracts in Cairo, Egypt. The main target for the interest is the group’s London casinos and its unused license in Westminster. It is understood a deal has been reached to sell the company and it is expected to close in Q1 of 2020. At year end Novomatic threw in the towel and agreed to sell its 17.19 percent shareholding in Casinos Austria AG (CASAG) to the Czech-based company Sazka, giving Sazka a controlling interest in CASAG. Since 2015, Novomatic and Sazka have both tried to gain control of CASAG, acquiring parcels of shares from various shareholders. Sazka believed some of the shares it had acquired came with a pre-emptive right over other share sales and was prepared to take legal action against Novomatic. But common sense prevailed, avoiding a public and, in all likelihood, a very messy court case. Instead the two companies agreed to cooperate. Then the competition authorities became interested and took action against Novomatic, on the basis that a large stake in CASAG would give them too much control over Austria’s gambling market. In the ensuing legal battle, a court found against Novomatic and forbade the company from buying more shares of CASAG. And there things stood until early in December, when Sazka and Novomatic announced they had reached agreement for Sazka to buy Novomatic’s shareholding in CASAG. With this purchase, which is subject to regulatory approval, Sazka now owns approximately 55% of CASAG. New licenses and renewals In January, the losing bidders for the new casino license in Andorra filed suit against the government after the license was awarded to local bingo company, JOCS SA. The winning bid was for a €10 million casino in the centre of the capital, Andorra la Vella, despite some of the other bids being significantly higher. Groupe Partouche and Genting alleged that an adviser that worked for the Andorran Gaming authorities was connected to JOCS and filed a criminal complaint against him. In February, under severe pressure, the Government reversed the award of the license for unrelated deficiencies in JOCS’ bid. Groupe Lucien Barriere, who came second in the bid, believe that given the allegations around JOCS, they should be named the winner. As of today, there is no resolution. Another land-based bid process that got into trouble was the award of a 30-year casino license for the casino resort in the €8 billion Hellinikon Development in Athens. The award process had been held up for years by the ruling left-wing Syriza party, despite pressure from the International Monetary Fund, the European Central Bank, and the European Commission to push the project forward. A down payment to the Greek Government of €1 billion for the land was dependent on the project moving ahead and the casino license was one of the conditions for this to happen. A change of government, broadly pro-business, allowed the process to move forward. Final bids had to be in by an early October deadline with the winner announced by the end of November. Caesars pulled out, which left only Mohegan Sun and Hard Rock International as bidders. The deadline had already been extended to allow for the bidders to ensure their bids were compliant. Unfortunately, one of the bidders, believed to be Hard Rock, missed the fact that the guarantees they had submitted now ran a few days short of the required length of time. The government allowed them to submit a revised guarantee, but, not so fast! The other bidder said this was illegal and should not have been allowed. Both Hard Rock and Mohegan have promised to sue the Government if the other party is ultimately selected. What could have been a fairly short selection process now looks like it will take until the middle of 2020 for a decision, and who knows how long the process will then take if the losing bidder decides to appeal the outcome. In the online world, a new Swedish Gambling Act came into force on January 1, 2019. Prior to this point only two monopoly operators, Svenska Spel and ATG, were allowed to provide gambling services in Sweden. But many online gambling companies, some based in Malta and Gibraltar and using the shield of the EU’s freedom to provide services across borders, had previously targeted Swedish residents. Today, not only do the newly-licensed operators have to compete with the two large incumbent companies, but also some 10 percent to 15 percent of the county’s €1.2 billion online gambling market is still being siphoned off by unlicensed operators. According to some highly vocal operators, Spelinspektionen, the Swedish Gambling Authority (SGA), has been too focussed on curbing advertising and bonussing, and on policing self exclusion schemes, rather than taking action against those illegally offering their services. In December the SGA admitted it had collected only one of the fines it had assessed. In February, the Dutch Senate approved a draft bill to legalise online gambling and allow the issuance of licences. The currently timetable looks as if the Remote Gambling Act will come into force on 1 January 2021 and the Kansspelautoriteit, the Dutch Gambling Board, will accept licence applications from that point, with the first games going live some six months later. Regulations and taxes There were many regulatory changes in 2019, mostly to reduce gambling supply or to restrict advertising. Anti Money Laundering regulations were tightened and enforcement led to a number of high-profile fines. Revenues at high-end casinos in Europe, especially those that cater to Asian customers, saw revenues plummet. The number of gambling machines in the market were reduced in Italy, Slovenia, the Czech Republic, and Germany. Maximum stakes on FOBTs were lowered in the UK from £100 per spin to £2 per spin, making the games and some of the venues uneconomic. Italy banned advertising of all gambling and this restriction is being debated in Spain and the UK. The harm caused by legal and regulated gambling has come to the front of the debate. Sector-wide self-exclusion schemes and deposit or loss limits are becoming mandatory. In the UK there is a real possibility that credit cards will no longer be allowed to fund accounts for gambling. And of course, in some countries gambling taxes have gone up. In summary Happy New Year, everyone!