Proposed Flutter Entertainment-Stars Group Merger Would Create £10 Billion Mega Operator, But Will Regulators Try to Block It?

Posted on: October 2, 2019, 08:35h. 

Last updated on: October 2, 2019, 11:56h.

A proposed merger between Flutter Entertainment – until recently Paddy Power Betfair – and PokerStars parent The Stars Group would create a £10 billion ($12.2 billion) online gambling powerhouse.

Flutter Entertainment
Flutter Entertainment’s proposed merger with the Stars Group would create the biggest online gambling company in the world by revenue.

The deal was announced Wednesday morning by Flutter CEO Peter Jackson, who would become CEO of the combined company. Stars Group CEO Rafi Ashkenazi would become COO.

In an all-share deal, Flutter shareholders would own approximately 54.64 percent of the new group, while Stars Group shareholders would hold 45.36 percent.

The enlarged group would have more than 13 million active customers in over 100 international markets, with annual revenues of £3.8 billion ($4.68 billion) last year, making it the world’s biggest e-gaming company by revenue.

‘Brief Flirtation’ Leads to Serious Commitment

Jackson told investors Wednesday that the two companies had a “brief flirtation” last year, but that talks had resumed over the summer.

“The combination will turbo-charge 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,” said Jackson.

The two companies were already among the largest online gambling companies in the world prior to the announcement of the deal, although trailing to competitors GVC and Bet365.

Consolidation in the gambling sector has accelerated in recent years. Flutter itself was formed from the 2016 merger of Paddy Power and Betfair, while the Stars Group became a tier one sports betting operator through the acquisition of Sky Betting & Gaming last year.

Competition Concerns?

But the deal is sure to face scrutiny from antitrust regulators, particularly in the UK, where it would create an entity with a 40 percent share of the online gambling market. A 25 percent market share is normally enough for the country’s Competition and Markets Authority to launch an investigation.

Nevertheless, Jackson told investors he was “confident” the deal will get “the relevant approvals.”

He also rejected suggestions that unexplained movements in Flutter’s share prices over the summer – which included an almost 20 percent surge on July 2 – had been sparked by leaked rumors of Stars Group negotiations.

“We don’t know what happened that day,” he said. “It’s still a mystery to us as to what happened. We were not in talks at the time, otherwise we would have had to disclose that to the market.”

Jackson said the deal would see the group well-positioned to take on the US markets as opportunities expand. Flutter is the owner of FanDuel, while The Stars Group has a relationship with Fox through their jointly-owned sports betting platform, FoxBet

Earlier this year, Fox invested $236 million for a 4.99 percent share of the Stars Group, with an option to acquire up to 50 percent in ten years’ time.