The European Commission has approved the exclusive rights awarded by the French state to the gambling operator FDJ, concluding a lengthy investigation that began in 2021. Initially concerned about potential unfair advantages, the Commission mandated an additional payment of €97 million, bringing the total to €477 million. Following this announcement, FDJ shares surged 4.6% on the Paris stock exchange, as the company expressed satisfaction with the closure of the case and the stability of its legal framework.
(BFM Bourse) – This Thursday, the European Commission approved the exclusive rights awarded by the French government to the gambling operator, who is now expected to include an additional payment of €97 million.
This marks the conclusion of a prolonged saga that has affected FDJ’s market performance for over three years.
In the summer of 2021, the European Commission initiated an inquiry into the French government’s exclusive 25-year rights granted to FDJ for both physical and online lotteries as well as sports betting, in exchange for a €380 million payment. The Commission sought to determine if this arrangement, part of the company’s privatization, conferred any undue advantages to FDJ.
The Commission’s ruling was delayed, causing market concerns about a potentially significant additional payment for the company (Citi Bank estimated this could exceed €1.5 billion in 2022). This uncertainty negatively impacted the visibility of FDJ’s stock performance.
However, in early October, FDJ CEO Stéphane Pallez expressed optimism on BFM Business that a decision would be forthcoming. Regarding a possible additional payment from Brussels, Pallez indicated that it would likely be “rather in the low hundreds of millions of euros, which we have perfectly taken into account.”
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Share Price Surge
Ultimately, the additional payment is even lower than anticipated. On Thursday, the European Commission announced its decision, concluding a drawn-out issue.
Brussels affirmed the legitimacy of granting exclusive rights to the gambling operator.
However, as part of discussions with the French government, the Commission approved alterations in the methodology for assessing these rights, resulting in a modest price addition of only €97 million (bringing the total to €477 million).
‘Given that France committed to raising FDJ’s remuneration to €477 million, the Commission determined this measure (the granting of exclusive rights) did not qualify as aid,’ stated Brussels.
‘Consequently, the Commission has sanctioned the French measure under the EU’s state aid regulations,’ it added.
Following the announcement, FDJ’s stock surged by 4.6% on the Paris stock exchange shortly after noon, post-communication from Brussels. “It’s excellent news as it alleviates uncertainty,” remarked Eric Bleines, head of equity management at Swiss Life Gestion Privée, on BFM Bourse.
In response to the European Commission’s announcement, FDJ released a statement in the early afternoon. “FDJ is pleased with the conclusion of this matter and the confirmation of the sound legal framework established during the company’s privatization, aligning with the Conseil d’Etat’s ruling from April 14, 2023,” the company stated.
FDJ clarified that the additional payment of €97 million will be categorized, similar to the entire exclusive rights payment, as an intangible asset, to be amortized over 25 years. This amortization for exclusive rights will amount to €37 million in 2024, following €15.2 million in 2023, and is projected to be €19.1 million in 2025.
FDJ indicated that this should not affect dividend calculations, as starting from 2024, the company will base its calculations on adjusted net income, which excludes specific items from the consolidated net income, including depreciation and amortization.