Gambling operator Flutter Entertainment plc could be forced to bid farewell to some of its brands, including its flagship one Paddy Power, in order to get competition authorities’ blessing to complete its multi-billion mega-merger with Canada’s The Stars Group, according to analysts cited by The Sunday Times.
Earlier this month, Flutter and The Stars Group announced a £10 billion all-share combination that will create the world’s largest online gaming and sports betting group by revenue.
According to indie financial services firm Canaccord Genuity, Flutter, whose investors will hold a 55% stake in the combined entity, could be ordered to sell both retail and online brands in order to get approval from UK’s Competition and Markets Authority to complete the deal.
On a pro-forma basis, the combined gambling powerhouse would have generated £3.8 billion in revenue in 2018. The merged operator will own some of the world’s most popular gambling brands, including Paddy Power, Betfair, and Sky Betting & Gaming.
Canaccord Genuity analysts say that the most “logical decision” would be for Flutter to sell Paddy Power’s online and retail business, given the importance of The Stars Group’s presence in lucrative markets such the US sports betting market through its BetStars and Sky Bet brands.
A Tough Decision
Canaccord Genuity says that the sale of Paddy Power would certainly be an “emotionally difficult decision” as the combined group’s plan is to have its headquarters in Dublin where Paddy Power has been based since its inception in the late 1990s.
According to Morgan Stanley analysts, the combined entity’s online betting revenue will be 50% higher than rival bet365’s and about twice as large as that of GVC Holdings, the owner of Ladbrokes Coral and a plethora of other popular brands.
Flutter (formerly Paddy Power Betfair) and The Stars Group’s decision to merge their operations came amid a wave of consolidation within the gambling industry that has been going on for more than four years now and has been prompted by growing competition, regulatory pressure in key markets, including the UK and Australia, and last year’s strikedown of a federal ban on sports betting in the US that paved the way for what could be the world’s largest athletic gambling market.
In the UK, the combined Flutter/The Stars Group operation will own three of the market’s seven largest sports betting and online gambling brands. That is likely to result in competition watchdogs seeking remedies due to the newly formed business’s enormous market share.
However, the merger is also likely to prompt regulatory scrutiny in Australia, as well. Flutter’s Sportsbet has an 18.1% share of Australia’s A$4.3 billion sports betting market and is the second largest operator Down Under, behind only Tabcorp, while The Stars Group’s BetEasy has 8.1%.
The combination of the two gambling giants is expected to close in the second half of 2020 pending regulatory approval.
Commenting on whether they were concerned about competition watchdog’s reaction to the proposed merger, Flutter Chief Executive Peter Jackson, who will serve as CEO of the combined business, said that they are “very respectful of the competition authorities” and that “we know they need to do their analysis.”
Source: Flutter may have to sell brands including Paddy Power as price of merger with Stars Group, TheTimes.co.uk
Follow us on Facebook and Twitter to stay up to date on the day’s top casino news stories
