Paddy Power and Betfair to create €7.5bn betting giant
The world's biggest online betting group is set to emerge from the planned €7.5bn merger between Paddy Power and UK firm Betfair.
Paddy Power chief executive Andy McCue hailed the move - a game changer for the industry in the UK especially - as a "merger of equals". Shares in both companies soared on the back of the proposed deal, which was announced yesterday.
The merger, in the making for just the past few weeks, will result in the creation of Paddy Power Betfair plc, a company that will be listed on the London and Dublin stock exchanges.
Between them, Paddy Power and Betfair generated net revenues of about €1.5bn last year.
The merger should be completed in early 2016, assuming it encounters no competition hurdles, which it is unlikely to.
Mr McCue, who'll be chief operations officer of the combined group, declined to say where the newly-merged business would be headquartered.
However, it's understood that it's likely to be in Dublin. Both brands will be retained.
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.
Mr McCue also said he couldn't predict at this stage the precise impact the merger would have on job numbers at both companies. Paddy Power employs about 1,400 people at its Dublin headquarters and a total of 5,000 worldwide. Betfair has an office in Dublin that employs about 130 people. The firm employs a total of 1,900 people.
Mr McCue said there would be "substantial synergies" generated as a result of the merger.
"There are cost synergies, as well as revenue synergies, but this deal is absolutely as much about growth as it is about synergies," he said.
Breon Corcoran, the chief executive of Betfair, and a former chief operating officer of Paddy Power, will be chief executive of the enlarged group. Gary McGann, who retires as chief executive of packaging group Smurfit Kappa next Tuesday, will be chairman. He's currently chairman of Paddy Power.
Paddy Power chief financial officer Cormac McCarthy will not be involved in the new group.
The deal comes amid a flurry of mergers and acquisitions activity in the UK betting sector. In July, Ladbrokes announced plans to merge with Gala Coral.
Betting firm 888 has been trying to buy rival Bwin. But Mr McCue said that the planned merger between Paddy Power and Betfair was being pursued from a position of strength.
"It accelerates our strategy," he said. "We have a very good organic strategy. Betfair have good momentum in their business. The combination of the companies becomes even more attractive and both are coming from a position of strength.
"It's a rare opportunity for a merger equals, of two leading players in a sector."
Breon Corcoran, who left Paddy Power over three years ago to take the helm at Betfair, said the proposed merger is "hugely exciting". The Betfair board batted away a near €1.5bn takeover bid for the firm two years ago. The company is now worth three times the price placed on it by its potential buyers.
Paddy Power and Betfair both released strong financial figures yesterday.
Paddy Power's operating profit rose 33pc to €80m in the first half of the year. The figure would have been 68pc higher before €32m in new taxes and product fees imposed on the firm.
Net revenue climbed 25pc to €527.8m. Betfair's first-quarter earnings before interest, tax, depreciation and amortisation rose 19pc to £41m (€56.1m).