City anticipates tough choices in Flutter’s pursuit of Stars

City analysts are pondering how Flutter Entertainment will sooth competition concerns across multiple markets, attached to its bold merger pursuit with digital rival The Stars Group Inc.

Since the merger was propositioned on 2 October, Flutter CEO Peter Jackson and corporate governance have emphasised confidence in clearing all regulatory hurdles to deliver a £10 billion online gambling powerhouse.

The stakes are high for Jackson and co, as the Flutter-Stars combination will lead US wagering partnerships with Fox Sports, Fastball Holdings and Boyd Interactive – all dependent on the deal being completed.

Nevertheless, city analysts believe that Flutter governance will face tough decisions if they are to secure regulatory harmony on a Stars merger if US ambitions are to be delivered.

This weekend, Canadian investment bank Canaccord Genuity issued an industry note to the Sunday Times detailing that it viewed a sale of flagship brand Paddy Power as the ‘most logical decision’ for Flutter to undertake.

A Flutter-Stars combination would create an entity with a 40% share of the UK online gambling marketplace, servicing three of the UK’s top seven most popular online bookmakers in Paddy Power, Betfair and Sky Bet.

In its note, Canaccord details that the above conditions will likely lead to UK CMA ‘concerns over consumer choice’ in online betting.

A Paddy Power break-up would be viewed as a controversial move, as Peter Jackson had previously underlined ‘returning the bookmaker to growth’ as core remit of the executive taking leadership of the FTSE firm in 2018.

Revitalising Paddy Power, Flutter has spent significant money and resources upgrading the bookmaker’s operating systems, all-round product proposition and revamping its loyalty programme wholesale.

In addition, Paddy Power’s ambitions have been supported by a number of high coverage UK advertising campaigns, as Peter Jackson moves to re-establish Flutter’s legacy brand as a leading mass-market bookmaker.

Elsewhere, analysts anticipate a market probe by either Australian Competition Tribunal (ACT) or the Australian Competition & Consumer Commission (ACCC) examining Flutter-Stars potential impacts on Australian sports betting.

In its acquisition note, Flutter governance stated that there should be no regulatory concerns in Australia as the company would be against TAB Holdings as the market leader.

Nevertheless, Flutter-Stars would control Australian online betting leader Sportsbet.com.au and BetEasy, a sportsbook brand formed by the Stars Group combining CrownBet and William Hill Australia for AUS $600 million (€480 million), which may see AUS competitors demand an ACT/ACCC watchdog review.

At present, Flutter governance maintains its schedule of completing the transaction by Q2-to-Q3 2020, an ambitious target for the merger’s stakeholders.