FanDuel and Paddy Power Betfair owner, Flutter Entertainment, has announced their merger with the Stars Group has got an informal go-ahead from the Australian Competition and Consumer Commission, with the final outcome of the deal still pending on the approval from the Australian Foreign Investment Review Board and a number of international regulatory bodies where both companies operate.
A Gaming Giant In The Making
The deal that is expected to merge Flutter Entertainment with the Canadian-based owner of PokerStars, the Stars Group, was initially made public in October 2019 and will divide the newly-formed company ownership by 54.64% to 45.36% for Flutter and TSG shareholders, respectively.
The newly-formed company will have its headquarters in Dublin and its main listing in London and will deliver pre-tax cost synergies of £140 million annually, as well as serve customers from more than 100 locations worldwide.
Along with approvals from the FCA, the London Stock Exchange, Euronext Dublin, and merger controls, both Flutter and TSG shareholders must vote in favour of the merger, with at least 66% of TSG shareholders’ vote needed for the deal to go ahead.
The newly-formed gaming giant would have generated £3.8 billion, as per 2018 numbers, and would be boosted by significant partnerships in the US and the UK, as in 2021 Fox Sports would have the right to acquire 18.5% as part of the FanDuel deal, and in the UK, the Stars Group bought Sky Betting & Gaming in a £3.36 billion deal.
For Flutter Entertainment everything started way back in 1988, when a chain of 42 shops in Ireland, owned by three small bookmaker chains, merged to form Paddy Power, which, in 2016, expanded further by merging with betting exchange Betfair in a period of consolidation within the industry.
Around half of the income generated by the combined company would come from customers from the UK and Ireland, with 15% from the Australian market, 5% from the U.S. and the rest of the world contributing to 31% of it, but these numbers would surely change in the next few years.
Shifting Market Focus
The perspective for tightening regulation and higher taxes in the three main markets Flutter Entertainment operates, UK, Ireland and Australia, is inevitably shifting the emphasis of the company towards the currently opening up market in the U.S. that presents huge potential for expansion and development.
The successful completion of the deal between Flutter and TSG is expected to boost by at least 50 percent the underlying earnings per share of Flutter in the first full financial year and, as part of the terms in the merger deal, TSG shareholders will be entitled to receive 0.2253 of new Flutter Entertainment shares for every share of TSG they own.