Paddy Power and Betfair will spend €89m to seal synergies
Published 09/09/2015 | 02:30
Paddy Power and Betfair expect to shoulder £65m (€89m) in cash costs as they integrate their businesses over the next three years as part of their planned €8bn merger.
The companies also confirmed that the merged business will be headquartered in Dublin, and have its primary stock market listing in London, where it will join the FTSE-100.
Releasing additional details of the merger yesterday, Paddy Power and Betfair executives said they expect to generate annual cost savings of about £50m (€69m) within three years of the merger being completed.
But they conceded that generating those savings will probably result in job losses. Paddy Power employs over 5,000 people around the world, while Betfair has 1,900 employees.
Of Paddy Power's total employees, 2,600 are based in Ireland and 1,400 of those at its headquarters in south Dublin. Betfair also has an office in Dublin employing about 130 people.
Paddy Power and Betfair said that an initial study of possible synergies has highlighted the potential for savings in areas where there may be duplication across "general corporate overheads and facilities", and "by rationalising certain operational and support functions".
"The Paddy Power directors and the Betfair directors anticipate that this may involve some headcount reduction," the firms said in a statement. The combined revenues of Paddy Power and Betfair are €1.7bn, with 80pc of that generated by online channels. That will make the merged business one of the world's largest public online betting and gaming companies.
Betfair chief executive Breon Corcoran and Paddy Power chief executive Andy McCue declined to provide investors with any substantive additional information yesterday except for their total anticipated cost savings.
Mr Corcoran will be chief executive of the new group - Paddy Power Betfair - while Mr McCue will be chief operating officer.
Executives at both firms have already pledged their stakes in the firms to the merger terms. They'll also receive replacement long-term incentive plan share options in the new company based on their existing options in either Paddy Power or Betfair.
A briefing in London was also attended by Gary McGann, the chairman Paddy Power, who'll be the chairman of the enlarged group, and Betfair chief financial officer Alex Gersh.
Mr Corcoran, a former Paddy Power executive, said the decision to base Paddy Power Betfair in Ireland will result in tax benefits.
"Both boards have determined that it is preferable for the business to be headquartered in Dublin," he said. "There are also benefits from an on-going tax perspective."
"These are two extremely strong businesses," he told analysts. "There are alumni in both businesses that have worked on each side. We think that's a relatively rare feature in a merger like this - that the cultures are similar.
"While we realise that there's some considerable execution risk, we believe it's lower than is normally seen in transactions of this kind."
The combined business will operate in over 100 countries, including the UK, Ireland, Australia, Italy, Canada, Denmark and the US. Of its combined revenues, 94pc will be derived from regulated markets.
Paddy Power shareholders will own 52pc of the merged business, with Betfair shareholders owning the remainder. Paddy Power shareholders will also receive a special dividend of €80m immediately prior to the transaction closing.