Flutter Entertainment, owners of FanDuel, and Stars Group, owners of PokerStars plan to merge in a move that would make them the world's biggest betting business. By combining two of the worlds biggest online betting companies, the group will have access to a presence in more than 100 countries worldwide.
Flutter Entertainment and The Stars Group Agree to Merge
Irish based company Flutter Entertainment Group, formerly known as Paddy Power Betfair has agreed to merge with Canadian company The Stars Group (TSG). Both companies are looking to position themselves to take advantage of the opening of gambling markets across the United States.
By merging with The Stars Group, Flutter Entertainment is adding four million more customers. It will also be adding a lot of complementary businesses under one roof. Once the proposed merger has been approved, shareholders of Flutter would own approximately 54.64% of the newly formed company. TSG shareholders would own about 45.36%. Based on revenues from 2018, Flutter and TSG's combined revenue would have totaled $4.7 billion. That would make them the largest online betting operator in the world.
Flutter Entertainment Is Bringing a Lot to the Table
Even before this deal, Flutter was already a big company. They own Paddy Power in Ireland, Sportsbet in Australia and FanDuel in the U.S. They have six million customers on three continents. Around half of their current income is from Britain and Ireland. Another 15% comes from Australia, 5% in the U.S and 31% from the rest of the world.
The merger is expected to give both companies huge opportunities to cross-sell products to each other's customers in international markets at a lower cost. Another reason for Flutter to focus on the U.S market is higher taxes and increased regulations in the UK and Australia. The markets in those countries are more mature which means slower growth. In the U.S the market is brand new which means it has huge potential for growth given the size of the population.
The Stars Group and FOX Bet
In May of 2019, The Stars Group and Fox Corporation announced plans to launch FOX Bet. The deal gave Fox Corporation 5% ownership of TSG. Fox also has the right to acquire up 50% of TSG's U.S operations within the next ten years based on certain conditions. The deal was the first of its kind with a national media company getting involved in the gambling business.
As a result of this new merger with Flutter, Fox will now have the right to acquire an 18.5% stake in Flutter's FanDuel U.S business as of 2021. This move will see FOX Bet pursue customers with the same cross-selling strategy that FanDuel uses by trying to get casino and poker customers over to sports betting. Selling one form of betting to customers interested in another will be a key feature of the newly formed company's strategy.
Cross-Branding the Name of the Game
This new company that will be formed by Flutter and TSG has come together as a result of a series of smaller mergers. In 2016, Paddy Power and Betfair merged to create Flutter Entertainment. In 2018, they acquired a 61% controlling stake in FanDuel with an option to increase its stake to 100% after five years.
The Stars Group for their part have been busy as well in recent years. In April 2018, they acquired Sky Betting & Gaming in cash and stock worth $4.7 billion. In May 2019, they announced their partnership with Fox Sports. The got $236 million for the 5% stake they sold to Fox Corporation.
This all-share merger will add Sky Bet to Paddy Power and Betfair in Ireland and Britain. It will also add BetEasy to Sportsbet in Australia. In the United States, it will add Fox Bet to FanDuel. Shareholders are expected to vote on the proposed merger in March of 2020 which is when Flutter reports its financial results for this year. Pending approval, the combined group will be incorporated and headquartered in Dublin with a listing on the London Stock Exchange and a secondary listing on Euronext Dublin.