Flutter Entertainment, the firm that owns both Paddy Power and Betfair, is set to buy The Stars Group (TSG), the firm that owns Sky Bet. the deal, valued at £10 billion, will create the largest online betting company in the world, based on revenue.
The deal gives Flutter shareholders a hefty 55% majority of a new online gaming group that had a combined revenue of £3.8 billion in 2018. This deal was reached with plans to move into the rapidly growing sports betting market in the United States. Flutter investors immediately gave their approval to the takeover, which they expect to result in cost savings of £140 million each year. This would raise Flutter shares up 20% to £91.96.
Furthermore, the deal will include a commercial tie-up with Fox Sports, a well-known U.S. broadcaster that is already the Canadian-based TSG’s U.S. betting partner. By agreeing to this tie-up, Fox Sports will get acquisition rights to 18.5% of FanDuel, the company’s U.S. Fantasy Sports business, at its market value from 2021.
FanDuel was acquired by Flutter Entertainment last year, in a bid to establish a U.S. bulkhead soon after the decision by the U.S. Supreme Court to legalise sports betting. That decision sparked a highly competitive race among U.K.-based bookmakers to make their mark in the lucrative new market.
With this new deal, Flutter Entertainment’s Chief Executive Peter Jackson will now spearhead a combined business serving about 4 million gambling enthusiasts in over 100 markets. Jackson says this recent takeover will “turbocharge” the company’s expansion strategy into new markets, while retaining their leading position in markets like the U.K., Australia, and Ireland at the same time.
“We believe the combination of Flutter and TSG will deliver substantial value for shareholders,” Jackson said. “We will have an exceptional portfolio of leading recreational brands and best-in-class products on industry-leading technology platforms.” Flutter Chairman Gary McGann also says the combined group will be a “strong voice in the promotion of responsible gambling worldwide.”
Back when the company was known as Paddy Power Betfair, Flutter Entertainment agreed to pay a £2.2 million penalty for responsible gaming failures in 2018. Part of this settlement had to do with a legal battle with the victim of what was believed to be theft perpetrated by a problem gambler. Flutter was also one of the few U.K.-based bookmakers to support the government’s decision to reduce the stakes on fixed-odds betting terminals (FOBTs) to £2.
Analysts say this recent takeover of TSG will effectively strengthen Flutter’s efforts to conquer the U.S. market. Additionally, it could pave the way for fresh consolidation in a sector that already bore witness to several mergers in recent years.
Russ Mould, Investment Director at AJ Bell, has this to say: “This will enable Flutter to capitalise upon the relaxation of American laws on sports betting, which is now legal in 11 states, with seven more primed to announce a launch date. It will also enable the company to diversify further beyond the British and Australian markets, where it is the leader in online punting. Both arenas are relatively mature, tightly regulated, and extremely competitive, even after several rounds of consolidation in the industry.”