Dave Gadhia has a message for anyone who questions the value of good governance: It can be worth $9-billion.
Mr. Gadhia is deputy chair of Flutter Entertainment PLC, one of the world’s largest gambling companies. He took a long, strange trip to help build what’s now a $40-billion business, It was a journey filled with boardroom intrigue, including showdowns with a former chief executive officer, regulators and major shareholders Blackstone Group Inc. and BlackRock Inc.
The four-year odyssey turned the Vancouver-based executive into an outspoken advocate for strong boards of directors, a role he’s taking on at a time when investors are increasingly focused on understanding the hard-to-measure environment, social and governance components of a company.
“The lesson from my experience is compelling value can be created by a board that takes its responsibilities seriously, and is willing to engage with shareholders,” Mr. Gadhia said in an interview.
Mr. Gadhia, 57, never intended to have a second career as a board member. He ran, then sold Burnaby, B.C.-based Gateway Casinos & Entertainment Ltd., one of Canada largest gambling companies. In 2010, he agreed to what he expected would be a six-month stint as a director at what was then called Amaya Inc. He did it as a favour to the co-founder, David Baazov.
What followed was a governance baptism by fire. Pointe-Claire, Que.-based Amaya acquired a number of online gambling businesses, including PokerStars, the dominant player in the sector. Then the company almost collapsed in 2016, when Mr. Baazov faced insider trading charges from Quebec’s securities regulator, an investigation that played out as he tried and failed to take Amaya private.
In the spring of 2016, the Amaya board named Mr. Gadhia as chair. Mr. Baazov departed in August. The stock price slumped, and although the company was the leading online poker platform with a $3-billion market capitalization, institutional shareholders pushed for its sale. Looking back, Mr. Gadhia said: “David was a great deal maker but a poor operator.”
To fix Amaya, Mr. Gadhia and the board called a halt to acquisitions. The chair renewed the board by recruiting proven directors, then hired executives with experience in the gambling sector. Amaya set a new course, diversifying away from a poker business that accounted for 70 per cent of revenue.
Then Mr. Gadhia hit the road for what he recalls as “intimidating” meetings with disgruntled shareholders, including Blackstone and BlackRock, two of the world’s largest fund managers.
“We had to look shareholders in the eye, explain we went wrong, and explain exactly what we were going to do to fix it,” he said.
Blackstone, BlackRock and a number of other institutions agreed to back the turnaround. A Canadian company that had nearly failed, leaving shareholders with nothing, found international suitors. Rather than being sold, Amaya returned to the acquisition trail, snapping up British-based Stars Group for $5-billion in 2014. The combined companies were taken over by Dublin-based Flutter in May for $9-billion, one of the largest successful deals in pandemic-plagued 2020.
“In my experience, boards should look at engaging with their stakeholders as an opportunity, not a threat, especially when you’re in crisis,” said Mr. Gadhia. “At a minimum, you’ll learn something. Beyond that, you might just find the allies you need to succeed.”
Flutter’s stock price is up 60 per cent since Mr. Gadhia joined its board in May, continuing a two-year rally in the company’s shares that reflects a more liberal approach to sports betting in the lucrative U.S. market. Flutter is already a major player in British sports wagering, and the company partnered with Fox Corp. as part of a push into the United States. Recent filings show BlackRock owns a 5-per-cent stake in Flutter, worth more than $2-billion.
As a board member, Mr. Gadhia said he cannot comment in detail on Flutter’s performance and strategy, but said the company is well-positioned to capitalize on the shift to sports betting through mobile devices, such as cellphones.
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