Flutter Entertainment Plc is buying The Stars Group Inc. in a $6 billion all-share deal to create the world’s biggest online gaming group and take advantage of opportunities in the U.S. after the Supreme Court legalized sports betting.
The deal allows the owner of gambling brands Paddy Power and Betfair to cut its reliance on Britain, where tighter rules on fixed-odds betting terminals and higher taxes for online betting have upended the industry.
The newly opened American market has sparked a land grab, and the company is turbocharging its effort with the purchase of Ontario-based Stars. The new group’s U.K. presence could nevertheless create competition concerns.
“The combination of both companies could trigger combined market shares exceeding 30 per cent, which would result in an in-depth investigation in the U.K.,” analysts at Kepler Cheuvreux said in a research note.
In May last year, America’s highest court struck down a federal law that had barred single-game gambling in most of the country. However, the only way for foreign companies to enter the market is through partnerships with U.S. firms. Days after the decision, Flutter, based in Dublin, bought fantasy sports site FanDuel. Meanwhile, Stars Group has partnered with various casinos including Eldorado Resorts Inc.
Flutter has offered 0.2253 of its shares in exchange for each share in Toronto-based Stars, it said in a statement. That assigns an equity value to the target of about 4.95 billion pounds (US$6 billion), which represents a premium of about 40 per cent to Tuesday’s closing share price, according to Bloomberg calculations.
Flutter’s shares rose as much as 22 per cent, and traded at 8,996 pence at 11:47 a.m. London time. Peers such as William Hill Plc also rose on the news. Stars rose 41 per cent in premarket trading.
The new group would have had revenue of 3.8 billion pounds last year, making it the world’s biggest online betting and gaming company, and the deal will achieve pretax synergies of about 140 million pounds a year, according to the statement.
Flutter’s chairman, CEO and chief financial officer will assume the same roles in the new group.
Goldman Sachs International and PJT Partners were financial advisers to Flutter. Barclays Plc, Moelis & Co. and BMO Capital Markets advised Stars.