Flutter Entertainment and The Stars Group are joining forces and an Aussie investor is a key figure in the deal. The deal is a A$18.3 billion mega merger that creates the biggest online gambling company in the world. Aussie investment banker Will Vicars is the man named as a key figure in this monumental deal.
Shareholders cast their vote in favour or against the merger in the second quarter of 2020. Everything points to an almost unanimous vote for creating this behemoth of a company. It is easy to see why both sets of shareholders are keen to get the deal across the line.
Annual savings of A$256 million are touted, as is combined annual revenue weighing in at A$6.92 billion. This, in turn, leads to more profits and, therefore, larger dividend payments. A win-win for all involved.
No money is changing hands as the mega merger is an all-share proposal. One share is TSG is exchanged for 0.2253 Flutter shares when the deal is completed. Flutter’s holding represents 54.64% of the company with TSG owning 45.36%
The astronomical financial figures are possible thanks to the new company boasting of 13 million customers. Flutter, formerly Paddy Power Betfair, generates the vast majority of its revenue from the United Kingdom and Ireland. TSG sees 53% of its annual revenue stem from the tag Rest of the World. Australians make up 22% of Flutter and 9% of TSG’s revenue stream. The new company sees 15% of its revenue stem from Aussie gamblers.
|UK & Ireland||59%||38%||49%|
The Sydney Morning Herald named Will Vicars as a key figure in this mega merger. Vicars is the Chief Investment Officer of Caledonia Investments. The Australian Stock Exchange and Sydney Future Exchange merged in 2006 under Vicars’ guidance. He was also instrumental in the US$8 billion deal merging Chicago Mercantile Exchange and Chicago Board of Trade. Now he has fingers in the Flutter-TSG mega merger.
Vicars and co-Chief Investment Officer Mike Messara helped Caledonia Investments build large stakes in both companies. Caledonia hold an 8% investment in Flutter Entertainment and a larger 19.5% holding in The Stars Group.
Both Vicars and Messara have reputations for getting deals across the line. The pair assisted in TSG acquiring Sky Betting & Gaming in 2018. It took less than three months for the $4.7 billion acquisition to complete. Vicars and Messara also helped push the Paddy Power Betfair’s purchase of FanDuel in the U.S. this deal only took two months from start to finish.
The new combined company has massive potential thanks to it diversifying its product portfolio. Morgan Stanley commented the company’s online revenues will become between 40-80% more than the current world number two and three players.
Investment bank Credit Suisse revealed the new company will enjoy 26% market share in Australia. This is because the company owns both Sportsbet and BetEasy who are major players in the Aussie market. Tabcorp is the industry leader in Australia with 50% market share of the estimated A$4.3 billion market.
Both Sportsbet and BetEasy benefit from the mega merger because more funds become available to them. Flutter has the option to invest heavily in any market it sees fit as it is set to become extremely cash-rich.
Shareholders are highly unlikely to object to the mega merger, but regulators could put a spanner in the works. The Competition Commission in the UK, formerly the Monopolies and Mergers Commission is a potential banana skin. They forced Ladbrokes and Coral to sell 1,000 betting shops before they gave their merger the green light. Ladbrokes Coral is now part of partypoker owners GVC Holdings.
The Australian Competition and Consumer Commission is another potential stumbling block. The ACCC needs assurances that the new company will not potentially wipe out smaller gambling entities.
This said, when Vicars and Messara get what they want when they put their mind to something. So expect this mega merger to be sealed at the earliest convenience.