Flutter-Stars Merger Receives UK CMA Approval
The enforced closure of casinos around the world is creating plenty of negativity at the moment. Positive news is hard to come by, but there is good news for those fans of the potential Flutter-Stars merger.
All potential mergers have undergo scrutiny from various commissions. It is a legal minefield with more red tape than anyone needs to deal with. Several commissions are pulling apart the Flutter-Stars merger due to its colossal size.
The newly formed company, created by a “mega-merger” is valued at $18.3 billion. This makes it the biggest gambling company in the world.
Officials around the world are worried the Flutter-Stars merger will create an environment that isn’t competitive. Such a massive company has the ability to put others out of business, reducing if not removing all viable competition.
CMA Gives Green Light to Flutter-Stars Merger
The UK Competitions and Markets Authority (CMA) this week gave the green light for the Flutter-Stars merger. This is a major positive step even if this is only the first of many phases of the review.
Flutter and The Stars Group agreed to terms on an all-share merger last October. A clear global market leader operating across all gambling verticals is set to be created.
Flutter’s Chief Executive, Peter Jackson, welcomed the CMA’s decision.
“This morning’s announcement from the CMA marks a further important milestone in the process towards completion of our proposed combination with The Stars Group. We continue to work with the remaining regulatory authorities to obtain the last of the outstanding approvals.”
“Separately last week we published the necessary documentation ahead of the shareholder votes in April. We continue to make good progress in our post-completion planning.”
Australia’s Competition and Consumer Commission gave the Flutter-Stars merger informal approval in February. Having backing from this authoritative figure is one major obstacle no longer needing navigating.
The Stars Group is unlikely to fall foul of any competition regulations in its native Canada. This is because very little competition actually exists with only PlayNow.com offering similar gambling products.
Flutter-Stars Merger Approval Moves To Phase 2
The CMA review states “the merger will not worsen the offering to people who choose to bet online.” CMA looks into whether mergers have the potential to result in customers offered less favourable odds. It also investigates if there will be less generous promotions or poorer quality products. It ruled this won’t be the case in this instance.
Phase 2 of the CMA review is next on the agenda for the Flutter-Stars merger. It’s here where there’s a potential for a hiccup. The CMA’s own regulatory guidance states no gambling company should have more than 25% market share. This Flutter-Stars merger creates a company with at least 40% of the take-up of UK online betting.
Several smaller commissions have to rule on the proposed merger. The ongoing COVID-19 pandemic is causing delays, however. The UK Financial Conduct Authority, London Stock Exchange, and Euronext Dublin are among the organisations yet to give their clearance.
Both Companies Suffering Badly Due to Coronavirus
Both Flutter and The Stars Group are eager to push their merger through in light of the coronavirus. A massive 78% of Flutter’s total revenue stemmed from sports betting last year. All major sporting events are cancelled or postponed with no return date in sight.
Flutter warned investors in February to expect a hit to profits of at least £90 million ($185.1 million). Share in Flutter hit an all-time low of 5690 pence per share on March 17 but have since rallied to almost 7,000 pence per share.
The Stars Group is also suffering financially, although it’s in a better position. It has focussed more on sports betting recently, but still generate a lot of money via poker and casino. Some 62% of TSG’s revenue came from these channels last year.