Betfair & PaddyPower merger set for early 2016

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Betting exchange Betfair (SBR rating A-) has increased the size of its online sportsbook two-fold in the past six months as it prepares for a merger with Irish bookmaker PaddyPower (SBR rating B+).

Betfair reported a 93% rise in sportsbook volumes to £800 million ($1.2 billion) in the six months to October 31, 2015, which drove an overall 15% revenue growth for the firm.

Sportsbook Review initially reported on October 26 of the Betfair and PaddyPower merger.

The deal is scheduled to be done in the first quarter of 2016, with Betfair CEO Breon Corcoran taking over as the head of the new company. The merger will translate to the creation of one of the world’s biggest online betting and gaming companies, with annual revenues to top more than £1 billion ($1.5 billion).

Revealing its half-year results, Betfair announced revenues of £274.4 million ($418 million), up 15% on the same period last year.

Betfair earnings report
Betfair reported a 9pc increase in EBITDA (earnings before tax, interest, depreciation and amortization) despite the introduction of a new 15% point of consumption tax on online wagering that was introduced in the UK in December 2014, which it £26.8 million in the past six months, according to the Telegraph.

The point of consumption tax is a 15% levy that was placed on profits on British transactions regardless of the bookmakers’ domicile, designed to combat the problem the government has faced in seeing sportsbooks decamp to havens like Gibraltar and the Isle of Man to avoid UK taxation.

Financial analysts have reacted favorably to the pending merger between Betfair and Paddy Power as it marries Betfair’s popular online sports betting exchange with Paddy Power’s vast land-based business, its thriving online business, its routes to market in Australia and Europe and its exceptionally successful marketing strategy. Paddy Power often rolls out creative prop bets, and even was the first to take wagers on the success of Star Wars.

Ladbrokes & Coral Merger
The businesses are different enough to make the threat of an intervention from the competition watchdog minimal and rivals will be left playing catch-up if and when the merger goes through. The market is consolidating to counter burdensome taxes with increased efficiency and economies of scale, especially as Ladbrokes and Coral have already announced a merger - though not all shareholders are on board.

Sportsbook Review will continue to keep readers updated on the status of the major betting industry mergers.

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