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OPAP | A broader game in play; scale meets complexity

Shifting narrative, rotation in progress – OPAP shares fell c15% peak to trough, after the announcement of the deal with Allwyn, before recovering partly as investors continue to digest the story (with the €19.04 cash exit also offering technical support). The pullback has been driven by a rotation in the shareholder base (as the investment case pivots from yield to growth) alongside corporate governance concerns (mostly around the preferred shares granting KKCG 85% of voting rights) & valuation questions around the non-OPAP assets.

Points to consider – Growth is good, but what ultimately matters is the price paid for that growth, and this is precisely what we aim to disentangle in this report. While the merger creates a global gaming platform of scale, a few aspects warrant a balanced look: 1) The FCF generating capacity of non-OPAP assets looks volatile and, in the near-term, will be weighed down by capex, licences, one-off costs, and M&A outlays. 2) Earn-outs linked mainly to PrizePicks (up to $1bn by 2029e) represent additional potential equity claims and may further dilute cash flow. 3) A significant part of the value of Allwyn assets stems from its 36.8% stake in Betano (& the related dividends received). After being sold by OPAP a few years ago, the business is effectively re-introduced at a much higher valuation, justified by the explosive growth that ensued. 4) Overall, the implied multiple for Allwyn’s ex-OPAP assets (>12x adj. EV/EBITDA per our calculation) mirrors best-in-class peers, leaving little room for execution slippage. Hence, while the combination adds diversification & growth, the risk-reward for OPAP minorities looks more nuanced as the group transitions from a cash-rich domestic franchise to a complex, more levered structure where cash flow visibility will take time to rebuild.

The path from here – Once the merger documentation and fairness opinions are finalised and approved, shareholders will vote on the matter in late Dec/early Jan. Dissenting shareholders retain a cash-exit right at €19.04, though the deal will proceed only if fewer than 5% of OPAP’s total share capital opts for cash — a threshold that could, in our view, allow some pragmatic flexibility if required. Should more than this threshold be tendered, the transaction will fall through, no cash will be paid, and the story will revert to its prior form, albeit with a less harmonious alignment between the main shareholder and minority investors implying a likely higher ERP attached to the stock than before. Against this backdrop, in the near term we view the shares as largely de-risked at current levels, since the €19.04 cash exit and the upcoming €0.50 DPS (ex-div 3rd Nov) together provide meaningful downside protection until the vote. That said, given the long runway to the EGM, we see room for the shares to overshoot or undershoot depending on deal optics, market tone and investor rotation dynamics.

Post-merger picture: Bigger, broader, but harder to read – While the growth narrative is likely to attract investor interest, especially those focused on Emerging markets, the proposed merger also introduces greater complexity in assessing underlying FCF generation, given the limited visibility around contingent earn-outs and integration effects. In our view, these factors may warrant a somewhat higher risk premium for the combined entity compared with standalone OPAP. As a result, how the market ultimately values the merged entity will depend on investor perception of scale benefits vs near-term risk. Our PT remains based on stand-alone OPAP pending clarity on deal completion.