Wednesday 16 October 2019

Paddy Power owner becomes the largest gaming operator in the world with merger

Photo: PA
Photo: PA

John Mulligan and Ellie Donnelly

Paddy Power and Betfair owner Flutter Entertainment expects to secure regulatory clearance next year for its transformative acquisition of Toronto-based gaming firm The Stars Group.

The new group will be the world’s largest online betting and gaming company.

Speaking to journalists this morning, Flutter Entertainment chief financial officer Jonathan Hill said that the group is “pretty confident” of getting the deal through regulatory hurdles.

However, he declined to say whether he thought watchdogs might force the proposed enlarged group to divest of any of its units in order to secure approval.

READ MORE: Paddy Power owner predicts windfall in US

“We expect to go through a process with the competition authorities,” said Mr Hill.

“We’re very respectful of the authorities – the CMA (Competition and Markets Authority) in the UK – and the important analysis they need to do in relation to this proposed transaction. We are confident that we will receive the relevant approvals at the appropriate time.”

He said much of the focus in terms of competition scrutiny will be around Ireland, the UK and Australia.

The proposed group will be top-heavy with Flutter Entertainment’s existing executive team.

Flutter’s chief executive, Peter Jackson, will lead the enlarged group, while Mr Hill will be chief financial officer. Stars Group chief executive Rafi Ashkenazi will be chief operating officer.

Veteran Irish businessman Gary McGann - currently chairman of Flutter - will also remain as chairman in the enlarged group structure.

READ MORE: 'I like a challenge but I’m not a masochist' - businessman McGann on his work ethic

“You can look at the fact that there is a premium being paid for the Stars business and then that gets reflected in the composition of the board and the management,” said Mr Hill.

Andy Higginson, a former senior Tesco executive and chairman of supermarket chain Morrisons, has also joined the Flutter board.

The deal has been done through an all-share combination to be implemented through an acquisition of TSG by Flutter, with Flutter shareholders owning 54.64pc of the group.

Combined annual revenue at the two companies would have been £3.8bn (€4.3bn) last year, making it the largest gaming operator globally.

Following the transaction, Flutter says it will have customers in more than 100 international markets.

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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.”

Under the terms of the deal, TSG shareholders will be entitled to receive 0.2253 new Flutter shares in exchange for each TSG Share.

The combined group will be incorporated, headquartered and domiciled in Dublin.

Davy analyst, Michael Mitchell, described the deal as “truly transformational” for “both the company and the industry.”

“We see strong strategic merit to the transaction. It improves Flutter’s position in key growth markets, including the US, while also bolstering scale and market position in its core (more mature) end-markets,” Mr Mitchell said.

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However, he added that acquisitions of this kind “are not without risk.”

“The deal would increase exposure to unregulated markets (Germany, Russia) and poker. However, simply put, it sets Flutter apart as a play on the attractive global gambling opportunity,” he added.

Last year Flutter Entertainment’s pre-tax profit fell 24pc to £81m in the six months to the end of June.

Underlying earnings before interest, tax, depreciation and amortisation were down 10pc, at £196m.

Paddy Power was created in 1998 by the merger of three Irish bookmakers.

It merged with British rival Betfair in 2016. The enlarged company acquired the US fantasy sports platform FanDuel last year and renamed itself Flutter Entertainment in May.

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