Bookmaker Flutter Entertainment Denies Private Equity Takeover Rumors After Shares Skyrocket Mysteriously

Posted on: July 4, 2019, 05:11h. 

Last updated on: July 4, 2019, 08:21h.

A sudden surge in the share price of Flutter Entertainment, the company until very recently known as Paddy Power Betfair, was sparked by speculation it had become the target of an unnamed buyer who possibly planned to take it private.

Flutter Entertainment
The source of the rumors that sparked the surge in Flutter Entertainment shares in unclear, although the company formerly known as Paddy Power Betfair appears to be as mystified as the rest of us. (Image: Flutter Entertainment)

Shares in the company shot up by 20 percent on the London Stock Exchange on Monday morning, their steepest one-day gain since August 2015 when it was announced that the then-separate entities, Paddy Power and Betfair, were to merge.

But stock fell slightly on Wednesday afternoon when the company said it knew of “no material reason” for the surge.

Who Started the Rumors?

The rumors first appear to have been first reported by the Financial Times’ Alphaville website, mid-Wednesday morning, although at this point Flutter’s share prices had already started to climb.

“There are a number of ideas underpinning the [share price] move, the most interesting (needless to say) is speculation about a buyout/take private,” wrote FT Alphaville on its Daily Market Chats message board.

We don’t have any name connected to that, to be clear, though PE [private equity] would be an obvious candidate. Blackstone’s Merlin bid suggests there’s a reasonable amount of cash available to managements who feel the public markets are undervaluing them.”

FT Alphaville is referring to the recent takeover bid of theme-parks group Merlin by a consortium of private investors led by Blackstone.

Market Poised for Consolidation?

It’s possible, too, that a US casino group might be interested in acquiring Flutter, although this would not gel with the rumor that the company would be taken private.

Last month, it emerged that Caesars had held talks with William Hill over a potential $7.6 billion merger in a bid to corner the emerging US sports betting markets, but the deal ultimately came to nothing. And meanwhile Caesars currently has quite enough M&A activity to be keeping it busy.

The move in share prices came a day after Deutsche Bank analysts said the online gaming sector in the UK was “poised for consolidation.”

We see the scope to create value from another wave of consolidation, with rising regulatory and marketing costs encouraging a drive for scale, given material cost synergies,” said the analysts.

But Flutter was not among those tipped by Deutsche Bank for a headline-grabbing merger. Having achieved significant scale through the Paddy Power and Betfair tie up, the company is focused on growing its US footprint, while acquiring outfits with leading positions in other emerging regulated gambling markets, as shown by its recent takeover of Republic of Georgia-based Adjarabet.

Deutsche Bank rated companies like William Hill and GVC as “buy” while Flutter was “hold” less than 24 hours before its stock went through the roof.

Investors didn’t listen to Deutsche Bank and their excitement appears to have been misplaced, while Flutter’s quick denial that there was anything going on behind the scenes on Wednesday seems to be genuine.