In the latest mega-merger to hit the gambling industry, The Stars Group (TSG) is to be acquired by Flutter Entertainment, operator of Betfair, FanDuel and Paddy Power via an all-share combination.
Immediately following completion of the Combination, Flutter Shareholders would own approximately 54.64 per cent and TSG Shareholders would own approximately 45.36 per cent of the share capital of the Combined Group.
Entering 2019, FTSE rumours circulated that Flutter governance had broached merger plans with Toronto TSX-listed Stars Group, seeking to develop an optimal multi-brand enterprise to dominate a disrupted global gambling sector.
Upon completion, it is intended that the Combined Group’s Board will comprise of:
- A 14-person Board drawing on expertise and experience of Flutter and TSG
- Gary McGann, currently Chair of Flutter, will assume the role of Chair of the Combined Group
- Divyesh (Dave) Gadhia, currently Executive Chairman of TSG, will assume the role of Deputy Chair of the Combined Group
- Peter Jackson, currently CEO of Flutter, will assume the role of CEO of the Combined Group
- Jonathan Hill, currently CFO of Flutter, will assume the role of CFO of the Combined Group
- Rafi Ashkenazi, currently CEO of TSG, will assume the role of COO of the Combined Group In addition, nine non-executive directors comprising five nominated by Flutter, three nominated by TSG and the appointment of Richard Flint, former CEO of SBG
The approval of Flutter and TSG Shareholders is expected to be sought in the second quarter of 2020. Completion is expected to occur during the second or third quarter of 2020 dependent on multi-market regulatory approval.
Chair of Flutter Gary McGann said: “This is an exciting and transformational combination that will bring together two strong, complementary businesses to create a global leader in the fast-growing online sports betting and gaming industry. Under Peter Jackson’s leadership, we will bring together a management team with the experience required to ensure successful integration of the businesses, with minimal disruption, during a time of unprecedented change in the sector. The Combined Group will be a strong voice in the promotion of responsible gaming worldwide and will lead industry standards on the protection of customers, whilst building sustainable relationships with them.”
In its initial merger prospectus, the combination of Flutter and Stars Group seeks to deliver ‘pre-tax cost savings of £140 million per annum’, combined with lower financial costs to exploit exponential growth across multiple territories.
Dave Gadhia, Executive Chairman of TSG, commented: “The Board of TSG and I are delighted to recommend this exciting combination of TSG and Flutter, which we believe will create significant value for TSG’s shareholders. Over the past four years our team, led by Rafi, has been working relentlessly and passionately to stabilise, grow and establish TSG as one of the clear leaders in our industry. We seized new opportunities in poker, significantly grew our casino business, acquired one of the UK’s most notable sportsbook brands in Sky Bet, built a significant presence in Australia through BetEasy, and teamed up with FOX Sports to launch FOX Bet to position ourselves to become a leader in the U.S. We have long had respect for Flutter, and believe the combination is a natural next step in the evolution of the business, creating a leader in online betting and gaming with trusted brands, diversified revenues, stand-out technology and the best operational and managerial talent in the industry. With TSG appointing a significant portion of the new Board, we look forward to working together with Gary, Peter and the Flutter team to continue and contribute to the success of our combined business.”
Peter Jackson, CEO of Flutter, said: “The combination represents a great opportunity to deliver a step-change in our presence in international markets and ensure we are ideally positioned to take advantage of the exciting opportunity in the US through a media relationship with FOX Sports as well as our development of US sports betting through Flutter’s FanDuel and TSG’s FOX Bet brands. We are committed to these two high-quality brands to drive the growth of the Combined Group in the US. The combination will turbocharge our existing four-pillar strategy and provide world-class capabilities across sports betting, gaming, daily fantasy sports and poker, as well as greater geographical and product diversification. We believe the combination of Flutter and TSG will deliver substantial value for shareholders. We will have an exceptional portfolio of leading recreational brands and best-in-class products on industry-leading technology platforms.”
Rafi Ashkenazi, CEO of TSG, added: “This exciting combination will allow us to enhance and accelerate our existing strategy. In recent years, we have transformed TSG from a single product operator in poker to a diverse global leader with multiple product offerings across poker, gaming and sports betting. The combination with Flutter will further enhance our company’s core strengths and position us strongly for the future in this rapidly evolving industry. I’m delighted to be joining the Board of the Combined Group and to serve as its COO.”
US market growth is central to the merger’s prospects, as Flutter governance details that it has entered into ‘third party’ arrangements with Fox Sports, Fastball Holdings and Boyd Interactive Gaming, conditional on the deal being completed.
Further US deal provision, will see Stars Group media partner Fox Sports gain the right to acquire an 18.5% stake in Flutter’s FanDuel subsidiary from 2021.
Meanwhile, Lachlan Murdoch, Executive Chairman and CEO of Fox Corporation said: “Our FOX Bet partnership is off to a great start, and teaming up with Flutter and FanDuel will allow us to build on that strength and jointly capture the significant market potential ahead of us. We’re excited to be able to expand our partnership into FanDuel, which together with FOX Bet, will be a leader in sports wagering in the US.”
Richard Flint, only recently inducted into the Sports Betting Hall of Fame, commented: “I have a lot of admiration for what Rafi and Dave have achieved in first stabilising, and then building one of the most successful gaming companies in the world through the acquisition of great businesses in both the UK and Australia. In addition, the growth of TSG’s online casino operations points to the success TSG has had in cross-selling casino product to its traditional poker customer base. I am excited about the prospect of joining the Board of the Combined Group as a Non-Executive Director following completion of the transaction and believe that the combination of TSG and Flutter will create a compelling proposition in global sports betting and gaming.”
On a proforma basis, the Combined Group’s annual revenue would have been £3.8bn in 2018, making it the largest online betting and gaming operator globally. The companies said that the combination is anticipated to deliver ‘substantial value creation for shareholders from pre-tax cost synergies of £140 million per annum, along with potential revenue cross-sell in international markets and lower finance costs’.