Analyst sees Paddy Power as “logical” choice
Following an industry-rocking merger announcement two weeks ago, Flutter Entertainment and The Stars Group still need to satisfy gaming regulators before the combination can be finalized. According to Canadian investment bank Canaccord Genuity, one way to do this is for Flutter to divest itself of its flagship brand, Paddy Power.
selling Paddy Power is the most “logical decision”
An analyst from Canaccord told the UK’s The Sunday Times this weekend that selling Paddy Power is the most “logical decision” to get the Competition and Markets Authority’s (CMA) blessing.
Competitive concerns in the UK
The issue at hand is whether the CMA will see the merger as limiting competition. The authority investigates such matters if a merger produces a combined market share of at least 25 percent.
the combined company would have about 37.5 percent of the market
GamblingCompliance estimates that the two companies would control nearly that exact proportion of the UK’s online gambling and sports betting market. Flutter owns Betfair and Paddy Power, while The Stars Group owns Sky Betting & Gaming and PokerStars.
In just the UK sports betting market, the combined company would have about 37.5 percent of the market. In Betfair, Paddy Power, and Sky Bet, it would also control three of the country’s top seven sports betting brands. Because of this, Canaccord believes Paddy Power as a candidate for sale would ease the CMA’s possible concerns. Canaccord ruled out Sky Bet because of The Stars Group’s momentum in the fast-growing sports betting industry in the United States.
Australia also in question
Australia could also pose a problem for the Flutter-The Stars Group combined company. It is possible that the Australian Competition Tribunal (ACT) or the Australian Competition & Consumer Commission (ACCC) could take a look at the merger. Flutter owns Sportsbet.com.au and The Stars Group controls BetEasy. The latter united the former CrownBet and William Hill Australia. Both compete with the Totalisator Agency Board (TAB) in Australia.
“We are very respectful,” said Flutter CEO Peter Jackson of Australia’s regulators after the merger announcement. “We know what we need to do in Australia and will work and engage with them in due course.”
Jackson downplayed concerns, adding, “We both run brands in Australia that are trying to take on the might of the TAB, they’re the behemoth in the market and we’re just small corporate bookmakers nipping at their heels.”
Merger creates multibillion-dollar giant
Flutter Entertainment and The Stars Group announced their all-stock merger on October 2. The Stars Group shareholders will receive .2253 new Flutter shares for each Stars share. Flutter shareholders will control the new company, owning 54.64 percent.
The combined company’s headquarters will be in Dublin, Ireland. The company, which has no official name yet, will trade on the London Stock Exchange. Flutter and The Stars Group generated a combined revenue of ￡3.8 billion ($4.67 billion) last year.
Flutter executives will, by and large, keep their positions in the new company. The Stars Group CEO Rafi Ashkenazi will be the combined company’s COO.