Flutter & the Stars Group

Flutter / Stars Group Merger

Flutter Entertainment Plc, the company that used to be known as Paddy Power Betfair, has confirmed that it will complete an $11 billion merger with the Stars Group Inc. The result will be the creation of a new FTSE100 company that will be one of the biggest gambling companies on the planet. The merger has been in the pipeline for around six months, with all regulatory and shareholder approval now in place.

The new partnership has sanction a listing that will be made on both the London Stock Exchange and the Dublin Securities Market on the 5th of May at 8 a.m. As part of the deal, Flutter will absorb the Stars Group’s assets, with the new-look business being split into five segments as far as reporting is concerned. The groups will be TSG International, PPB Legacy, Sky Bet, Sportsbet Australia and US Unit.

The Reasoning Behind the Deal

Any time that two big companies such as this reach an agreement over a merger, the obvious question to ask is ‘why’. In the case of the Stars Group and Flutter Entertainment, the answer lies in the newly emerging market in the United States of America. It will be worth a huge amount of money once it is up and running, with the biggest betting companies on the planet aligning themselves to take advantage of it.

The trend of consolidation has been going on for quite a long time now, with this just the latest move in that same vein. That’s why Flutter Entertainment wanted to buy the Stars Group, because of their relatively easy access to such a gigantic market. The new company will be well-placed to ensure that they’re the front-runners for American bettors, which they will hope will soon make the merger look like good value for all.

A Deal a Long Time Coming

The deal between Flutter Entertainment and the Stars Group has been a long time coming, having first been announced in October of last year. The deal was agreed in order to allow Flutter to purchase all of the shares of the Stars Group, creating a new business that will have a combined revenue of £3.8 billion annually. It makes the new company the largest online betting and gaming operator in the world.

The plan to take over the Stars Group has been six months or so in the making, with Flutter feeling that they’ve actually completed it ‘on schedule’. There were numerous obstacles that needed to be hurdled before the deal could be completed, including gaining approval from the shareholders and regulatory permissions. The latter was particularly complicated, given the groups operate in the United Kingdom, Australia and the US.

How the Company Will Be Structured

When Flutter Entertainment absorbs the Stars Group’s assets, it will then deploy what is being referred to as a ‘new organisational design’. This will ensure that the various localised portfolios will be able to maintain a sense of autonomy and therefore respond to changes in the market quickly and efficiently. Despite the various local portfolios, however, the company as a whole will benefit from the group’s wider resources.

For now, the five different reporting segments of the company will be as follows:

  • PPB Legacy – This will look after Paddy Power, Betfair, Paddy Power’s retail shops and business to business practice, as well as Adjarabet
  • US Unit – Both FanDuel Group and the Stars Group’s US operations come under this heading
  • TSG International – The various PokerStars sites from around the world, excluding the United States of America, will be here
  • Sportsbet Australia – The Australian arm of the company will report separately to others
  • Sky Bet – Sky Betting and Gaming assets will be reported under this title

In the future, Flutter will then look to form four core operating divisions. This will result in Paddy Power Betfair’s international assets and those of the Stars Group International being merged. There will also be a new division that will combine Paddy Power’s assets in the United Kingdom and Ireland with those of Sky Bet. The behemoth of a company will look to keep a hold on its various assets by using this approach.

What Is Being Said About the Merger

Unsurprisingly, the noises coming out of both camps are filled with positivity. The Group Chief Executive Officer, Peter Jackson, has confirmed that he is ‘delighted’ with the combination, which will become official on the 5th of May. He said, “The enlarged Group brings together exceptional brands, products and businesses, a hugely talented and experienced team, and a diverse global presence.”

During uncertain times, Jackson believes that the new-look company will be able to approach the future with ‘confidence’. He was also quick to point to the legacy of strong leadership in terms of responsible gambling that both groups are able to boast. He said, “As a combination, we are determined to deliver on our commitment to drive a race to the top when it comes to responsible gambling best practice across the sector.”

Jackson spoke of his admiration for Rafi Ashkenazi, who he said had created an ‘exceptional business’ in the form of The Stars Group. Jackson pointed out that Ashkenazi helped to transform it from a ‘single product operator to a diverse global leader with multiple product offerings’. Now Flutter Entertainment are looking forward to a ‘new era’ as an ‘enlarged organisation’.