Flutter Entertainment and Nasdaq- and Toronto-listed Stars Group said today they were merging in a deal that will create one of the world’s largest gambling businesses.
Shareholders in Flutter, formerly known as Paddy Power Betfair, will own approximately 54.6 per cent of the new company with Stars shareholders owning approximately 45.3 per cent of the combined group.
The combined revenue of the two businesses in 2018 was £3.8bn and their combined market capitalisation is £11bn, enough to make it one of the world’s largest online betting and gaming operators globally.
The new business will be based in Dublin, with a premium listing on the London Stock Exchange and a secondary listing on Euronext Dublin.
Flutter shares jumped nearly 14 per cent this morning to 8,700p.
News of the deal also boosted other gambling stocks, with William Hill up 3.65 per cent, 888 Holdings up 1.8 per cent and GVC Holdings up nearly one per cent.
The two businesses said the merger would help the combined group crack the US market which is liberalising its gambling rules.
The pair said the deal would create value for shareholders with pre-tax cost-synergies of £140m per annum along with lower finance costs.
Flutter chief executive Peter Jackson will be chief executive of the combined group with Flutter chair Gary McGann taking the role of chair.
Flutter has entered into third-party deals in the US with Fox Sports, Fastball Holdings and Boyd Interactive Gaming conditional on the merger going ahead.
FOX Sports will have the right to acquire an 18.5 per cent stake in Flutter’s Fanduel US business from 2021.
Flutter merged its US business with fantasy sports company Fanduel last year.
Star beefed up its UK offering last year with a $4.7bn (£3.8bn) takeover of Skybet.
The deal is subject to shareholder and regulatory approval and is set to complete in the second or third quarter of 2020.
McGann said: “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.”
Shore Capital analyst Greg Johnson said: “The news certainly interrupted the cornflakes this morning. Several years after failed tie-up with William Hill and a couple years after acquiring SkyBet, Stars Group is set to debut on the UK market with the a recommended all share merger with Flutter, formerly Paddy Power Betfair.”
Johnson said: “The key global opportunity is the US, with Flutter leading the charge so far and Star’s star up with Fox. The enlarged entity should help market access, although we are unsure the if this is a game changer.”
Flutter is being advised by investment banks Goldman Sachs International and PJT Partners, and law firms Freshfields Bruckhaus Deringer, Arthur Cox, Blank Rome, Stikeman Elliot and Clayton Utz.
TSG is being advised by investment banks Barclays, Moelis & Company and BMO Capital Markets, and law firms Blake, Cassels & Graydon, Jones Day, Slaughter and May, Osler, Hoskin & Harcourt, A&L Goodbody and Gilbert + Tobin.