Flutter Entertainment to merge with Stars Group

Viktor Vangelov | Published 2 Oct 2019, 1:05 p.m.

Mergers are a common practice the gambling industry. Companies acquire other companies, or two entities merge together as one mainly because they would like to cut costs and because they believe that together, they will be able to face all challenges easily and respond to market pressure and competition in a way that will enable them to boost profits and performance.

Paddy Power and Betfair merged last year and that was a pretty big event in the gambling industry, as one of the largest players in the UK and internationally. Soon after the two operators, Paddy Power and Betfair joined forces to form Paddy Power Betfair, they decided to go through with a name change and call the company Flutter Entertainment.

The name change was confirmed in May this year and the new entity decided to use the name Flutter Entertainment in all contexts and with all customers, in all communications.

The new subject will generate £3.8 billion annually 

The decision of Flutter Entertainment to acquire shares of the Stars Group and it is estimated that the total revenue of the new subject is estimated to be about £3.8 billion per year. This deal would actually create the largest online betting company in the world. Flutter Entertainment would give up on 0.2253 of its new shares in exchange for the TSG shares. Once the deal gores through, shareholders at Flutter would own about 54.64% of all the shares in the new business, whereas previous shareowners at TSG would possess 45.36% of the new company.

It is estimated that the merger will be quite beneficial for shareholders and will consolidate their pre-tax costs, decreasing the amount by £140 million per year, with an increased opportunity for cross selling the services on international markets at lower costs.

The post-tax returns on invested capital is expected to exceed the annual cost of capital at Flutter at least three years after the merger has been completed. Increased cash flow is also expected.

The newly formed company will be providing a wide range of services, including sports betting, casino gaming, poker, free games and a lot more.

Merger will be beneficial for all shareholders

Sources at Flutter claim that with the merger, the new entity will have greater success at implementing the company’s strategy by maximising profit growth in core markets with increased growth in international markets. The company is also eyeing US expansion.

CEO of Flutter, Peter Jackson who is expected to assume the same position at the new entity stated that the merger is a great opportunity which will enable the company to deliver impressive results and increase their market presence.

He added that the merger will generate more value for all shareholders. In addition to Jackson, it is also expected that Jonathan Hill who is currently chief financial officer at Flutter Entertainment will assume the same position in the new company, whereas, TSG’s CEO Rafi Ashkenazi should be named COO at the new entity. 

Gary McGann who is chair of Flutter Entertainment will be named chair of the new company, whereas current TSG chair will likely become deputy chair of the new company. Ashkenazi also said that the merger will enable them to accelerate growth in accordance with the strategy.