Paddy Power shareholders in line for €80m windfall if Betfair merger agreed
Colourful bookmaker Paddy Power has agreed in principle the key terms of a possible merger with internet betting exchange Betfair.
The news was announced to the stock exchange this morning.
And Paddy Power shareholders are in line for an €80m windfalll if the merger terms are agreed.
"The combination has compelling strategic logic and represents an attractive opportunity for both companies to enhance their position in online betting and gaming and to deliver synergies, customer benefits and shareholder value," the companies said in a joint statement.
If the deal proceeds, Betfair chief executive Breon Corcoran would lead the combined group.
Paddy Power boss Andy McCue would become chief operations officer. Paddy Power chairman Gary McGann would be chairman of the combined group, of which Paddy Power shareholders would own 52pc and Betfair shareholders would own 48pc.
Discussions continue regarding other terms of the merger. The companies said they expect to provide a further update in the coming weeks, adding that there is no certainty that the deal will occur.
The deal would bring together two of the best known brands in gambling. Paddy Power was set up in 1988 and is renowned for its strong high street presence and outrageous marketing stunts.
Betfair meanwhile revolutionised the gambling industry when it was set up in 1999 with its online exchange and focus on betting over the Internet.
Meanwhile, Paddy Power posted a 33pc jump in operating profit in the first half, taking in €80m. Net revenues rose 25pc.
"We have made substantial progress implementing the strategy we set out in March, with further payback to come from new mobile product releases, refreshed marketing campaigns and efficiency gains. We now expect full year 2015 reported operating profit to be a mid to high single digit percentage above 2014 and the consensus market forecast," Mr McCue said.
Meanwhile, Betfair has reported a revenue surge of15pc to £135m (€184m) in the first quarter of this year.
In an unscheduled announcement, Betfair said it's first quarter revenues rose year on year even though the company did not have a major sports tournament like a World Cup this year.
Betting firms' revenues are traditionally higher in years with big sports events, especially football.
Earnings before interest, tax, depreciation, and amortization rose 19pc to £41m.
Betfair chief executive Breon Corcoran, who will lead the combined Betfair/Paddy Power business if their merger goes through, said the deal was "hugely exciting".
"It would create a truly global sports betting group with unmatched products and talent, and significantly enhanced scale. The combined business would be one of the world’s largest online sports betting operators, with revenues totalling more than £1 billion," he added.
Davy Stockbrokers' David Jennings said the results were "very strong" and added that upgrades to Betfair's full year forecasts were now "inevitable".