Flutter’s takeover of Stars Group still making waves

by Charlotte Lee Last Updated
Flutter and TSG performing strongly

Flutter Entertainment’s much publicised takeover deal of The Stars Group has been all the rage in recent times.

When the deal was first made public on October 2, it caught the attention of people in the business world ranging from the gambling industry to the stock markets.

Casino Aus reports that Flutter, formerly Paddy Power Betfair, was going to acquire The Stars Group.

They are the parent company of PokerStars.

A combined valuation of the companies put the deal’s worth at 9.8 billion pounds.

The merger is expected to give Flutter shareholders 54.64 per cent of the combined stock, with the remainder left to The Stars Group shareholders.

The unified company is also expected to see increased revenue from cross promotions, lower finance costs and pre-tax cost synergies of 140 million pound annually.

The result will be a “global leader in sports betting and gaming” with approximately 13 million customers in more than 100 betting markets.

The companies hope to sign on the dotted line by the second or third quarter of next year.

Australian market to feel impact of merge

The Australian market is one of the largest impacted by the acquisition.

The merger will benefit Sportsbet and BetEasy in the Australian market, with their $4.3 billion in annual revenue equating to 26 per cent of the market share.

Expectations grew even more when both companies separately reported their third quarter financials earlier this month, with both seeing significant growth in Australia.

Praising the success of Australian and UK divisions in the third quarter, The Stars Group claimed “rapid progress” in its overall performance.

The total revenue increased to $622.4 million, an upswing of 8.8 per cent, prominently featuring customer engagement and business patterns in the United Kingdom and Australia.

This was accentuated by a larger sports betting vertical, which comprises 35 per cent of TSG’s total business.

Australia posted $71.1 million in the third quarter, up 36.4 per cent over year.

This was driven by higher betting net win margins despite a decrease in stakes due to the 2018 FIFA World Cup results and foreign exchange fluctuations.

Flutter Entertainment’s third quarter results saw a 10 per cent rise in revenue to 533 million pounds, with the Australian growth up 19 per cent.

The report highlighted improving sales in Australia, with Sportsbet revenues up 19 per cent from the previous year.

Overall, Flutter sports betting revenue was up by 11 per cent with only an eight per cent increase in gambling in general.

New group CEO in 2020

Also announced recently was Flutter’s choice for a new company chairman.

Andrew Higginson plans to leave his position as the board chairman of Morrisons supermarket group to step in for current position holder Gary McGann when he retires.

The move will likely happen in the second quarter of 2020 as the acquisition nears.

The handover might even happen at the company’s next general meeting in May 2020.

Mr Higginson will be one of the key people to spearhead the transition as the acquisition reaches its final approval stages.

Regulators from markets around the world will need to approve the acquisition.

The companies will most notably have to persuade the UK Gambling Commission’s Competition and Market’s Authority and the Australian Competition and Consumer Commission.

Some analysts suggested that concerns about a monopoly could be assuaged by the unloading of a piece of the current Flutter holdings.

Flutter could offload Paddy Power to appease governmental business watchdogs, offsetting the Sky Bet acquisition that would be part of The Stars Group deal.

Flutter’s chief executive officer Peter Jackson said last month that: “We know what we need to do in Australia and will work and engage with them in due course.”

He added they are “very respectful” of the Australian regulators and oversight groups.

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