Flutter Entertainment buys 56% stake in Brazil's NSX Group

Paddy Power owner Flutter Entertainment said on Friday that it has bought a 56% stake in NSX Group, a Brazilian operator of the Betnacional brand, for around $350m.

Flutter said the deal fully aligns with its strategy to invest in leadership positions in international markets, "securing a podium position for Flutter on completion in the regulating and fast-growing Brazilian market".

NSX is the number four operator in Brazil, with a portfolio of brands which include the flagship Betnacional brand. On a standalone basis, it is expected to generate revenue of about $256m and adjusted EBITDA of $34m in 2024.

Under the terms of the deal, Flutter will pay the $350m cash consideration and contribute its existing Betfair Brazil business, in return for a 56% stake in the newly-combined Flutter Brazil business.

In addition, a mechanism has been put in place to enable Flutter to increase its shareholding through reciprocal put/call arrangements in year five and 10 following the completion date.

Chief executive Peter Jackson said: "I am excited to announce the addition of NSX, operator of Betnacional a leading Brazilian sports betting and iGaming brand, to the Flutter portfolio.

"We believe that combining the extensive local expertise of the NSX team, our existing Betfair business and the power of the Flutter Edge, will create a compelling opportunity to capitalise on the growth opportunity in Brazil which presents an exciting runway of future growth."

Shore Capital analyst Greg Johnson said: "Given the size of this fast growing and newly regulated market, Flutter expansion in Brazil is not a surprise.

"We see this as a sensible move, further expanding and accelerating its growth profile, consistent with its expansion profile and medium-term leverage ratios, albeit it will likely limit EBITDA growth (ex-US) next year.

"We would also see a positive read-across to Entain and the implied valuation of its larger Brazil within the context of the wider group."

Shore has a ‘hold’ rating on Flutter and a ‘buy’ on Entain, "reflecting the wide valuation differentials".