The proposed $18.3 billion mega merger between Flutter Entertainment and The Stars Group is one step closer to completion. Australia’s Competition and Consumer Commission has granted the merger informal approval.

Tuesday saw the Australian Competition and Consumer Commission give its authorisation, which is a major step forward for the merger. There’s still a long way to go before finalisation, but The Stars Group and Flutter merger looks like happening.

Flutter is listed on the London Stock Exchange and must publish any regulatory updates to investors. It made a brief statement confirming the news.

“Flutter Entertainment PLC confirms that it has received notification from the Australian Competition and Consumer Commission that its proposed combination with The Stars Group Inc. has been granted informal approval.”

Investors in Flutter reacted positively, increasing the share price by 1.98%. Shares in The Stars Group increased by 2.62% because of the positive news.

The Stars Group and Flutter Have More Hurdles To Cross

Gaining approval from the Australian Competition and Consumer Commission is only the first regulatory body The Stars Group and Flutter need the green light from. Several more hurdles and obstacles lay in wait.

The Stars Group is unlikely to face much scrutiny from its home country’s regulators because it’s headquartered in Canada where little competition already exists. Only PlayNow.com offer online gambling comparative to The Stars Group’s portfolio and they are already tiny in comparison.

Flutter, on the other hand, faces some thorough checks in its home country of the United Kingdom. The Competition and Markets Authority oversees potential mergers and takeovers in the UK. It strives to ensure any merger doesn’t give the company an unfair advantage over the competition.

Many believe the merger between The Stars Group and Flutter will do exactly this. The new company boasts of $18.3 billion in value and more than 13 million customers. UK’s Competition and Markets Authority will have something to say about this, no doubt.

The stepped in when Ladbrokes and Gala Coral merged and forced both parties to sell betting shops before rubber-stamping the deal.

Closer to home, the Australian Foreign Investment Review Board will pass its eye over the potential merger. They need assurances The Stars Group and Flutter merger won’t create what is essentially a monopoly.

The biggest fear is the new company will be so powerful it could swallow up rivals. This is bad for customers because a lack of competition lets the last man standing do as he pleases.

Who’s Paying For This Merger and Why?

No actual funds are exchanging hands when the merger of Flutter and The Stars Group completes. It is purely an all-share deal. The Stars Group receives 0.2253 Flutter shares for each of its shares. Those Flutter shares are worth $6.95 billion at the locked in price, leaving Flutter with a 54.64% stake in the to-be-formed company. This leaves The Stars Group with a 43.36% stake.

It is easy to see why both companies are eager for the deal to forge ahead. Combining their customers base gives them 13 million customers. Combine the revenues and the joint companies generate $6.92 billion per year.

Those figures are astronomical. Merging also diversifies the merged company’s revenue streams. Flutter is strong in online sports betting, thanks to Paddy Power and Betfair, and Retail (again, Paddy Power). It is extremely week in poker and only 15% of its revenue stems from online gaming and casino.

The Stars Group has zero revenue from retail as it is purely an online company. It excels in poker because of PokerStars and Full Tilt, while its casino and gaming produce 30% of its revenues.

Forming the new company also limits risk if a region decides to change its stance regarding online gambling. Almost 60% of Flutter’s revenue comes from UK & Irish gamblers. Only 9% comes from Rest of the World, which doesn’t include the USA or Australia.

Compare this to The Stars Group whose Rest of World revenue makes up 53% of its total.