PaddyPower inches closer to $7.5 billion deal

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Paddy Power (SBR rating B+) and betting exchange Betfair (SBR rating A-) have taken a big step towards a £5 billion ($7.5 billion) merger after both sets of shareholders voted in favour of the deal.

The two firms held simultaneous extraordinary meetings to allow shareholders to vote, and an overwhelming 99.9% were in favour of the merger.

At the Betfair meeting in London 262 shareholders holding 67,410,247 shares in the company voted in favour of the deal, against two shareholders that voted against it. Those two investors held just 423 shares.

It was a similar story at Paddy Power, where those in favour of the merger won a landslide at the general meeting in Dublin.

The new sportsbook will be called Paddy Power Betfair and Betfair shareholders will each receive 0.4254 shares in the new company for each share of Betfair they owned.

Paddy Power shareholders will end up with 52% of the new company and they will also share a special dividend worth €80 million ($87 million).

The merger is now tantalisingly close. Last week it skirted a major hurdle when the notoriously prickly UK Competition and Markets Authority – which has previously scuppered plans for a merger between Ladbrokes and Coral – gave the deal the green light.

They are now just waited on the Irish Commission of Competition & Consumer Protection to approve the merger, and that looks a formality after the UK competition watchdog’s decision.

The merger is set to be completed in the first quarter of 2016.

Some jobs will be lost due to “efficiency savings” designed to cut £25 million ($37 million) a year from operating costs, but the new firm will still have 7,000 staff and become one of the world’s largest online sportsbooks.

Ladbrokes and Coral are trying once again to merge in a bid to pool resources and fight back, but they are still awaiting the all-important green light from the UK competition watchdog. The problem those bookmakers are facing is not that they will be too dominant online – where they have to compete with the likes of Bet365 and Sky Bet as well as Paddy Power Betfair – but that they will own 47% of the UK’s retail land-based betting market. They could dodge this problem by selling off several hundred stores, and Betfred owner Fred Done is interested in taking some off their hands.

Ladbrokes and Coral have urged the competition authority to speed up its decision-making process but have had no joy so far, allowing Paddy Power and Betfair to steal a march.

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