- »The Stars Group Agrees to Flutter Acquisition
The Stars Group Agrees to Flutter Acquisition
There were some intense discussions happening behind the closed office doors at The Stars Group in Toronto this summer. While most people didn’t know that it was any more than simple management changes, it turned out to be much more.
The Stars Group made the announcement this week, alongside Flutter Entertainment, which was formerly known as PaddyPower Betfair. The two gambling companies plan to merge, with Flutter set to acquire a majority share in The Stars Group.
In the morning hours of October 2, the announcement began to make its way through the news cycle and across social media: Flutter Entertainment and The Stars Group (TSG) reached an agreement on the terms of a recommended all-share combination via an acquisition of TSG by Flutter.
Simply put, Flutter will acquire TSG.
The purpose is to create a “global leader in sports betting and gaming.”
Further, the statement noted that both companies’ proven track records of using product and brand leadership to create low-cost customer acquisition channels. And the value of the combined entity will happen by way of cross-selling products to optimize value.
According to the proposal, The Stars Group is valued at approximately $9 billion.
The combined annual revenue of the two companies in 2018 would have been approximately £3.8 billion, which would have made it the largest online betting and gaming operator in the world.
Both companies expect the deal to be finalized in the second or third quarter of 2020.
The Game Plan
TSG and Flutter first must obtain the proper legislative and regulatory approvals in the UK, Ireland, Australia, Canada, and the United States.
At that point, Flutter shareholders will purchase 54.64% of the combined stocks, and TSG shareholders will own 45.36%.
A 14-person board of directors will consist of recruits from both companies. Some of them will be as follows and serve in these roles:
- Flutter Chair Gary McGann will be Chair of combined group.
- TSG Executive Chairman Divvesh Gadhia will be Deputy Chair of combined group.
- Flutter CEO Peter Jackson will be CEO of combined group.
- TSG CEO Rafi Ashkenazi will be COO of combined group.
- Flutter DFO Jonathan Hill will be CFO of combined group.
- Flutter will nominate five and TSG will nominate three non-executive directors.
- Former SBG CEO Richard Flint will be appointed to the board.
According to the duo’s strategy, the combined group will accelerate delivery of Flutter’s four-pillar growth strategy, which is:
- Maximize profitable growth in core markets of UK, Ireland, and Australia.
- Provide platform and capabilities to accelerate growth in international markets.
- Attain podium positions in Spain, Italy, and Germany while providing a solid customer proposition to 4 million active customers in more than 100 international markets.
- Pursue US opportunities through brands, media reach, and product offerings.
The combined group anticipates “substantial value creation for shareholders from pre-tax cost synergies of £140 million per annum,” along with revenue increases and finance cost decreases.
Flutter and TSG own companies and brands that will be affected by the merger.
In that elusive US market, Flutter has already pushed ahead by signing agreements with FOX Sports, which is TSG’s US media partner for FOX Bet), Fastball Holdings, and Boyd Interactive Gaming. FOX Sports will then – upon the completion of the acquisition – have the right to acquire 18.5% equity interest in Flutter’s FanDuel at its 2021 market value. Fastball and Boyd will receive a payment of 12.5% of the increase in in market value.
Voices of the Players
Flutter Chair McGann called it an exciting and transformational combination that will bring together “two strong, complementary businesses.” He was also careful to say that the combined group will be a strong voice in the promotion of responsible gaming practices, build sustainable relationships, and lead the industry in customer protections.
TSG Executive Chairman Gadhia called the merger an exciting combination. He noted a longtime respect for Flutter and believes the merger is a “natural next step in the evolution of the business.” He also mentioned that this happened under the leadership of Ashkenazi, who worked for four years to grow and stabilize TSG through new opportunities.
Speaking of Ashkenazi, he also called the merger exciting and a way to “enhance and accelerate our existing strategy.” He believes it will enhance TSG’s core strengths and “position us strongly for the future in this rapidly evolving industry.”
Flutter’s Jackson deemed it a great opportunity for Flutter to position itself better in the international marketplace with a special focus on the US market. He specifically mentioned Flutter’s FanDuel and TSG’s FOX Bet as the two brands to drive that US growth.
The stock market has shown is approval in significant share price increases for both companies.
The Stars Group, trading as TSGI.TO, was at CA$20.24 before the announcement and jumped as high as CA$27.10 on the first day after it. At its highest point of the past few days, it traded at CA$28.10.
Flutter, trading as FLTR on the London Stock Exchange, was at £7,626 before the news, at which point it hit £9,194 on October 2. It since settled in at £8,090 at close on October 4.