Paddy Power Deal Creates World's Biggest Online Betting Group
Flutter Entertainment, owners of gambling giants Paddy Power Betfair, has announced a deal to buy Canadian online gaming company The Stars Group, in a move that creates the world's biggest online betting group.
With combined values estimated at £10billion, this acquisition would make Flutter the richest betting group by revenue in the world, with its shareholders owning 55 per cent of the new company, and Stars' shareholders taking the remaining 45 per cent.
The deal comes largely out of shared motivation to capitalise on the new US sports betting industry, opened up by the Supreme Court's decision to allow states to legalise sports betting from May 2018.
Flutter immediately bought US daily fantasy sport site FanDuel, and Stars, which owns the major brands PokerStars and SkyBet, as well as Australian powerhouse BetEasy, announced a partnership with Fox Sports in May of this year to provide sports betting to the US.
'Turbocharge' Deal Set For 2020
In a statement, Flutter and Stars said that combined revenue in 2018 would have been £3.8billion, and that their combined products will reach four million active users across 100 markets, to produce an estimated pre-tax cost synergy of £140million per annum.
Shareholders approval for this deal is expected to be sought in the second quarter of 2020, and should it go through, Peter Jackson, the current CEO of Flutter, will be promoted to take on that role for the entire group, with present Stars [TSG] CEO, Rafi Ashkenazi taking on the role of group COO.
"I’m delighted to be joining the Board of the Combined Group and to serve as its COO," said Ashkenazi. "In recent years, we have transformed TSG from a single product operator in poker, to a diverse global leader with multiple product offerings across poker, gaming and sports betting.
"The combination with Flutter will further enhance our company’s core strengths, and position us strongly for the future in this rapidly evolving industry.”
Jackson added: “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.
"The combination will turbocharge our existing four-pillar strategy and provide world-class capabilities across sports betting, gaming, daily fantasy sports and poker, as well as greater geographical and product diversification.”
Fox Sports Key To US Goals
That four-pillar strategy begins with maximising profitable growth in core markets and ends with "pursuing US opportunity rigorously". This deal would give the group access to markets in 24 states, to horse racing betting in 30 states, and to 100 million Fox Sports viewers.
As part of the tie-up, Fox Sports will have the right to acquire an approximately 18.5 per cent stake in FanDuel at 2021 market value, in return for waiving the exclusivity provisions incorporated into existing contracts.
Lachlan Murdoch, Executive Chairman and CEO of Fox Corporation said: “Our FOX Bet partnership is off to a great start, and teaming up with Flutter and FanDuel will allow us to build on that strength and jointly capture the significant market potential ahead of us.
"We’re excited to be able to expand our partnership into FanDuel, which together with FOX Bet, will be a leader in sports wagering in the US.”
Despite this US focus, the new group will be incorporated and headquartered in Dublin, Ireland, where Flutter, and Paddy Power Betfair are presently based. It will be listed on the London Stock Exchange, with a secondary listing on Euronext Dublin.
Richard Flint Back On Board
The full board will be 14-strong, taking from Flutter and Stars' existing personnel, as well as Richard Flint (pictured), formerly Executive Chair of Sky Bet Gaming. Flint left Sky Bet at the end of June, having led the company as managing director, and then chief executive and executive chair since 2001.
The move came after last October's takeover by Stars, Flint waiting until the transition period was over to announce his wish to pursue other opportunities. It appears, they have come.
He said: “I have a lot of admiration for what Rafi and Dave [Gadhia, Stars' Executive Chair] have achieved in first stabilising, and then building one of the most successful gaming companies in the world through the acquisition of great businesses in both the UK and Australia.
"In addition, the growth of TSG’s online casino operations points to the success TSG has had in cross-selling casino product to its traditional poker customer base.
"I am excited about the prospect of joining the Board of the Combined Group as a Non-Executive Director following completion of the transaction and believe that the combination of TSG and Flutter will create a compelling proposition in global sports betting and gaming.”
Flutter's Chair Gary McCann will assume the role of Chair for the new group, while Stars' Executive Chairman Dave Gadhia becomes Deputy Chair.
"We have long had respect for Flutter," said Gadhia, "and believe the combination is a natural next step in the evolution of the business, creating a leader in online betting and gaming with trusted brands, diversified revenues, stand-out technology and the best operational and managerial talent in the industry.
"With TSG appointing a significant portion of the new board, we look forward to working together with Gary, Peter and the Flutter team to continue and contribute to the success of our combined business."
McCann added: "This is an exciting and transformational combination that will bring together two strong, complementary businesses to create a global leader in the fast-growing online sports betting and gaming industry.
Under Peter Jackson’s leadership we will bring together a management team with the experience required to ensure a successful integration of the businesses, with minimal disruption, during a time of unprecedented change in the sector."
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