DUBLIN, Ireland: Flutter Entertainment plc, formerly Paddy Power Betfair, and The Stars Group (TSG), parent company of PokerStars, announced Wednesday agreement on the terms of a recommended all-share combination to be implemented through an acquisition of TSG by Flutter.
The merger, aimed at taking advantage of opportunities in the US after the Supreme Court legalized sports betting, will create a behemoth in the online gambling industry, valued at £10 billion ($12.3 billion) and which generates some £4 billion in annual revenue, the companies announced Wednesday.
The new group would have had revenue of £3.8 billion last year, making it the world’s biggest online betting and gaming company, and the deal will achieve pretax synergies of about £140 million a year, according to the statement.
Flutter’s offer assigns an equity value to Stars Group of about £4.95 billion ($6 billion), which represents a premium of about 40% to Tuesday’s closing share price, according to Bloomberg calculations.
Still, the combined company’s U.K. presence could create competition concerns, Bloomberg reports.
“The combination of both companies could trigger combined market shares exceeding 30%, which would result in an in-depth investigation in the U.K.,” analysts at Kepler Cheuvreux stated in a research note accessed by the business newswire.
The combined group will be incorporated, headquartered and domiciled in Dublin with a premium listing on the London Stock Exchange and a secondary listing on Euronext Dublin.
Strategic highlights
•The Combined Group will be well diversified from both a geographical and product offering perspective
•The Combined Group’s product offering across sports betting, poker, casino, fantasy sports and free-to-play games will be best-in-class
•The Combination will accelerate delivery of Flutter’s four pillar growth strategy:
o Help the Combined Group to maximise profitable growth in its core markets of the UK, Ireland and Australia
o Provide the platform and capabilities to accelerate growth across international markets
o Attain new podium positions in Spain, Italy and Germany and provide a highly regarded customer proposition to approximately 4 million Active Customers in more than 100 international markets
o Ideally position the Combined Group to pursue the US opportunity through a leading combination of brands, media reach and product offering
Commenting on today’s announcement, Gary McGann, Chair of Flutter said:
“This is an exciting and transformational combination that will bring together two strong, complementary businesses to create a global leader in the fast-growing online sports betting and gaming industry.
Under Peter Jackson’s leadership we will bring together a management team with the experience required to ensure a successful integration of the businesses, with minimal disruption, during a time of unprecedented change in the sector.
The Combined Group will be a strong voice in the promotion of responsible gaming worldwide and will lead industry standards on the protection of customers, whilst building sustainable relationships with them.”
Commenting on Wednesday’s announcement, Divyesh (Dave) Gadhia, executive chairman of TSG said: “The Board of TSG and I are delighted to recommend this exciting combination of TSG and Flutter, which we believe will create significant value for TSG’s shareholders.
“Over the past four years our team, led by Rafi, has been working relentlessly and passionately to stabilise, grow and establish TSG as one of the clear leaders in our industry. We seized new opportunities in poker, significantly grew our casino business, acquired one of the UK’s most notable sportsbook brands in Sky Bet, built a significant presence in Australia through BetEasy, and teamed up with FOX Sports to launch FOX Bet to position ourselves to become a leader in the US.
“We have long had respect for Flutter, and believe the combination is a natural next step in the evolution of the business, creating a leader in online betting and gaming with trusted brands, diversified revenues, stand-out technology and the best operational and managerial talent in the industry.
“With TSG appointing a significant portion of the new board, we look forward to working together with Gary (McGann, chair of Flutter), Peter (Jackson) and the Flutter team to continue and contribute to the success of our combined business.”
Peter Jackson, CEO of Flutter, said: “The combination represents a great opportunity to deliver a step change in our presence in international markets and ensure we are ideally positioned to take advantage of the exciting opportunity in the US through a media relationship with FOX Sports as well as our development of US sports betting through Flutter’s FanDuel and TSG’s FOX Bet brands. We are committed to these two high quality brands to drive the growth of the combined group in the US.
“The combination will turbocharge our existing four-pillar strategy and provide world-class capabilities across sports betting, gaming, daily fantasy sports and poker, as well as greater geographical and product diversification.
“We believe the combination of Flutter and TSG will deliver substantial value for shareholders. We will have an exceptional portfolio of leading
recreational brands and best-in-class products on industry-leading technology
platforms.”
Rafi Ashkenazi, CEO of TSG, added: “This exciting combination will allow us to enhance and accelerate our existing strategy. In recent years, we have transformed TSG from a single product operator in poker, to a diverse global leader with multiple product offerings across poker, gaming and sports betting. The combination with Flutter will further enhance our company’s core strengths, and position us strongly for the future in this rapidly evolving industry. I’m delighted to be joining the board of the combined group and to serve as its COO.”
Lachlan Murdoch, executive chairman and CEO of Fox Corporation, noted: “Our FOX Bet partnership is off to a great start, and teaming up with Flutter and FanDuel will allow us to build on that strength and jointly capture the significant market potential ahead of us. We’re excited to be able to expand our partnership into FanDuel, which together with FOX Bet, will be a leader in sports wagering in the US.”
Commenting on today’s announcement, Richard Flint, former CEO of SBG, said: “I have a lot of admiration for what Rafi and Dave have achieved in first stabilising, and then building one of the most successful gaming companies in the world through the acquisition of great businesses in both the UK and Australia.
“In addition, the growth of TSG’s online casino operations points to the success TSG has had in cross-selling casino product to its traditional poker customer base.
“I am excited about the prospect of joining the Board of the Combined Group as a non-executive director following completion of the transaction and believe that the combination of TSG and Flutter will create a compelling proposition in global sports betting and gaming.”
