TORONTO: The Stars Group (TSG), parent company of PokerStars, announced at the weekend that it has agreed to acquire Sky Betting & Gaming (SBG) from CVC Capital Partners and Sky plc in a cash and stock transaction valued at $4.7 billion.
This combination will result in the world’s largest publicly listed online gaming company.
Under the terms of the acquisition agreement and based on the closing price of The Stars Group’s common stock on April 20, the transaction has an enterprise value of approximately $4.7 billion, of which $3.6 billion is payable in cash and the remainder is payable in approximately 37.9 million newly-issued common shares. The new shares will represent approximately 20% of The Stars Group’s issued and outstanding common shares giving effect to the transaction and the anticipated acquisitions of CrownBet and William Hill Australia.
PokerStars launched its India operations recently, signing two breand ambassadors and partnering Global Poker League for an upcoming ‘long run’ league.
“The acquisition of Sky Betting & Gaming is a landmark moment in The Stars Group’s history,” stated Rafi Ashkenazi, the company’s chief executive officer. “SBG operates one of the world’s fastest growing sportsbooks and is one of the United Kingdom’s leading gaming providers. SBG’s premier sports betting product is the ideal complement to our industry-leading poker platform. The ability to offer two low-cost acquisition channels of this magnitude provides The Stars Group with great growth potential and will significantly increase our ability to create winning moments for our customers.”
Ashkenazi concluded, “Following this transaction, The Stars Group will have significantly enhanced scale and a highly-regarded global brand portfolio. As a result, we are well positioned to realize our vision of becoming the world’s favorite iGaming destination.”
This acquisition will provide The Stars Group with multiple operational and financial benefits, including:
*Greater revenue diversification and significantly enhanced exposure to sports betting, the world’s largest and fastest growing online gaming segment, as the majority of SBG’s revenues are generated by sports betting.
*An increased presence in regulated markets, particularly within the United Kingdom, the world’s largest regulated online gaming market.
*The development of sports betting as a second low-cost customer acquisition channel, complementing The Stars Group’s core poker business and enabling more effective cross-sell to players across multiple verticals.
*Improved products and technology as a result of the addition of SBG’s innovative casino and sports book offerings, and portfolio of popular mobile apps.
*Identified cost synergies of at least $70 million per year.
SBG is currently home to the United Kingdom’s largest active online player base and, with over 80% of revenues generated from mobile devices, is a leading mobile betting and gaming operator. In partnership with Sky, Europe’s leading sports broadcaster and media company, SBG has developed some of online gaming’s most well-known brands, most notably Sky Bet, Sky Vegas and Sky Casino.
SBG’s unaudited annual revenue was £624 million and unaudited adjusted EBITDA1 was £202 million in the 12-month period ended December 31, 2017, representing compounded annual growth rates of approximately 46% and 51%, respectively, over the prior two years. SBG was the United Kingdom’s fastest growing established online gaming operator over this period. Following the acquisition, The Stars Group’s leadership will draw from two well-respected and highly experienced teams and SBG’s Yorkshire base will operate as a major hub of the enlarged group.
“We are delighted to join forces with The Stars Group,” said Richard Flint, Sky Betting & Gaming’s chief executive officer. “We have had a fantastic last few years and would like to thank CVC and Sky for supporting us in becoming a leading online operator in the UK. This transaction allows us to offer our best-in-class products to a truly global audience. We’re excited about our future together.”
Pev Hooper, partner at CVC, said, “Richard and his team have done a fantastic job building Sky Betting & Gaming into one of the UK’s largest and fastest growing operators. We have thoroughly enjoyed working closely with the team and our partners at Sky. This combination with The Stars Group opens a new and exciting chapter for SBG to accelerate its international growth, and we look forward to continuing the journey as a shareholder in the combined group.”
The Stars Group estimates that the transaction will be neutral to adjusted earnings per share on a diluted basis in the first full year following its completion and have a positive impact thereafter.
The Stars Group has obtained fully committed debt financing of approximately $6.9 billion including $5.1 billion of first lien term loans, $1.4 billion of senior unsecured notes and a $400 million revolving credit facility. The funded proceeds of $6.5 billion will be used for the cash portion of the transaction consideration, refinancing the Company’s existing first lien term loan and repaying SBG’s outstanding debt.
The Stars Group’s board of directors unanimously approved the transaction. The Stars Group currently anticipates completing the transaction in the third quarter of 2018.
The Stars Group will retain SBG’s rights under certain commercial, licensing and marketing arrangements with Sky. Certain of these arrangements currently cover the United Kingdom, Italy, and Germany, as applicable, and include a framework to cover additional mutually agreed upon regulated geographies in the future.
