Flutter and The Stars Group Set For Mega Merger

Flutter Entertainment Plc and The Stars Group are set for a merger that creates a company valued at A$18.3 billion. The combined company sees a behemoth on an online gambling company created, the biggest in the world.

The deal needs to be approved by shareholders in both companies, although it is expected to progress smoothly. Voting opens in the second quarter of 2020 with the deal pencilled in to complete in the third quarter. No fee has been touted as the merger is an all-share combination. Instead, 0.2253 Flutter Entertainment shares are exchanged for every 1 The Stars Group share.

Peter Jackson, the current Chief Executive of Flutter, is the man confirmed as the new company’s boss. TSG’s chief executive Rafi Ashkenazi becomes the Chief Operating Officer one the deal completes. Flutter’s Gary McGann assumes the role of Chairman with TSG’s Duvyesh Gadhia becoming the Deputy Chairman. The new company’s Chief Financial Officer is Jonathan Hill, who currently holds this position with Flutter.

Who Or What is Flutter?

An announcement to the London Stock Exchanges revealed the new company will trade under the name Flutter. It may not be a name man are familiar with as it is relatively new, but the companies involved are not.

Paddy Power Betfair, a gigantic gaming company formed when Betfair and Paddy Power combined in a $10.63 billion merger in August 2015, rebranded to Flutter in May 2019. The name is a doff of the cap to a company the Betfair Exchange acquired in its infancy.

TVG and sportsbet, two brands owned by Flutter, currently operate in Australia. The Stars Group’s presence in Australia stems from its BetEasy business.

The Stars Group Background

Formed in June 2014 The Stars Group was then known as Amaya. Disgraced businessman David Baazov acquired the parent company of PokerStars and Full Tilt Poker for A$7.26 billion. Amaya rebranded to The Stars Group four years later before acquiring Sky Betting & Gaming in an A$6.96 billion deal.

New Flutter Company to Generate A$6.92 Billion Annual Revenue

It is easy to see why both parties are keen the merger goes through because the figures involved are astronomical. Combining revenue streams sees the annual revenue generate weigh in at A$6.92 billion. This huge sum is achievable thanks to a massive combined customer base of 13 million, many of whom live in Australia.

The gambling industry has been consolidating of late as rising taxes and new legislation puts pressure on companies. This merger helps both parties, not only in terms of revenue, but also in diversifying revenue streams. Putting all your eggs in one basket is never a good idea, especially in the world of iGaming.

Currently, Flutter generates 22 percent of its revenue from Australian sources. This is topped up by 10 percent from the United States, and 59 precent from the UK & Ireland. Its Rest of the World (RoW) customers provide the remaining nine-percent.

TSG has a much narrower range when it comes to its sources of revenue. Thirty-eight percent comes from UK & Irish customers and only nine-percent from Australians. No revenue comes from the United States, with a whopping 53 percent coming from RoW.

Region Flutter TSG Combined
UK & Ireland 59% 38% 49%
RoW 9% 53% 31%
Australia 22% 9% 15%
United States 10% 0% 5%

Merger Compliments Both Parties

TSG is best known for its online poker site PokerStars although it only generates 35 percent if the company’s revenue. It used to be a lot more until the Sky bet acquisition and the successful launch of BetStars. Retail, that is physical betting shops, is an area TSG has never had a presence. Compare this to the 18 percent of revenue generated by Flutter’s retail are and you can see why the merger makes sense.

Conversely, a non-measurable sum comes from Flutter’s online poker operation. It owns Betfair Poker and Paddy Power Poker, but both are on the iPoker Network where traffic continually drops.

Revenue Stream Flutter TSG Combined
Online Sports Betting 58% 32% 45%
Online Gaming 15% 30% 22%
Retail 18% 0% 9%
Poker 0% 35% 18%
Other 9% 3% 6%