Supplier News
Austria – Record breaking Novomatic derailed by Austrian competition watchdog
By Phil - 31 August 2016
Austrian slot giant Novomatic recorded record turnover during the six months to June 30 but could have had its efforts to buy Casinos Austria derailed by the Austrian Cartel Court which deals with anti-competition issues.
The court, backed up by the Federal Competition Authority (BWB), has prohibited the planned acquisition which it believes would limit competition. Novomatic has been given four weeks to appeal. The manufacturer and operator has already stated that the Austrian competition watchdog set excessively tough conditions for the planned takeover.
The court stated that Novomatic’s share in ‘problematic market segments’ would increase to between 68 and per cent in the event of the acquisition. It had presented the requirements that Novomatic would have to meet in order for the dealto go through but Novomatic declined.
CEO of Novomatic, Harald Neumann said: “Unfortunately, it has become evident that the BWB, and the experts appointed by the BWB, have adopted a viewpoint that has precluded any solution that would be economically feasible for Novomatic. Most of the requirements called for would not be commercially viable for the Novomatic Group and would thwart the positive development of CASAG.”
Although Novomatic offered compromises in the areas deemed relevant by the BWB, structural changes regarding the casinos operated by the Novomatic Group in the Czech Republic were also demanded – measures that even included selling some locations. By the same token, the Video Lottery Terminals (VLTs) operated by the CASAG Group would have been subject to restrictions, bringing significant economic disadvantages to both companies.
In the opinion of Novomatic, the BWB gave inadequate consideration to the fact that this is not a normal competition situation but a legal monopoly. In any case, the essential competition parameters in this area are strictly regulated by the state. Therefore, it was incomprehensible for Novomatic that this merger would restrict competition in any relevant way.
“Until the last moment, we fought for a solution that would have been viable for everyone concerned. In order to avert substantial economic disadvantages for the company, we could not accept the requirements demanded of us. What is especially unfortunate here is that an Austrian solution has failed. Moreover, player protection across channels and companies would have been made possible along with positive fiscal effects,” added Mr. Neumann.
Novomatic said it will now strategically reevaluate this situation regarding future investments in Austria, and in any case, reserves the right to appeal the decision of the BWB.
Having been going head to head for shares in Casino Austria, Novomatic had agreed to partner with Sazka Group, which represents the investment group KKCG and Emma Capital, to ensure a smoother passage to the takeover of Casinos Austria. With this deal now seemingly a non-starter, analysts will be keen to see how Sazka Group responds.
Sazka Investment Director Stephan Dlouhy said: “It is too early to say how the decision of the Cartel Court will actually affect things. We are willing to increase our shares in CASAG (Casinos Austria AG) and the Austrian Lotteries and there are no antitrust problems on our side that would prevent us from obtaining a release for further acquisitions. Together with ÖBIB, Novomatic and all relevant stakeholders we’re committed to finding a solution that is beneficial for CASAG and the Republic of Austria. We remain determined to achieve this goal in the context of legal requirements.”
It was the second piece of bad news for Novomatic in the Austrian market in as many months. July saw the Administrative Court in Austria rule that the award of two Austrian casino licenses by the Treasury in June 2014 to Novomatic did not satisfy ‘ transparency requirements’ meaning licences in Bruck an der Mur in Salzburg and Prater, in Vienna’s second district of Leopoldstadt, must be retendered.
The knockback from the Cartel Court came as turnover in Novomatic’s first half hit €1.1bn, marking an increase of 10.8 per cent from the first half of 2015.
Novomatic’s staffing levels also hit record heights, increasing by 12.1 per cent to 22,373.
Mr. Neumann said: “We pursued our growth strategy during the first half of the year and have undertaken a number of important expansions. With our acquisition of the British gaming operator Talarius, we have further increased our market share in the important UK gaming market, and we are now the largest operator of gaming arcades in the UK. Our intention to acquire a stake in the Australian listed gaming technology company Ainsworth would give a massive boost to our market position in Australasia, as well as in North and South America.”
The group also recently took over two casinos in Spain buying the Aljarafe Gran Casino in the province of Seville and reopening Casino Admiral San Roque in the province of Cadiz.
