Flutter/Stars Group deal: The key numbers and questions
Combined firm could account for a quarter of the US betting market and a third of the UK
Flutter today announced the all-share acquisition of The Stars Group (TSG) to create what the two companies claim will be the world’s largest online betting and gaming operator.
Here’s some of the key takeaway from the deal documents, investors and analysts:
38%
Estimated online UK market share of the combined group, according to Regulus Partners, along with 43% in Ireland and 38% in Australia. Several analysts raised questions about CMA approval, but Regulus noted: “We believe that a combination of high levels of consumer choice and low barriers to entry in all of these markets is likely to provide strong grounds for acceptance.”
In today’s analyst call, Flutter CEO Peter Jackson also sought to quell any such concerns, including any notion it would have to sell brands the deal for the deal to obtain CMA approval.
The combination between @FlutterPLC and The Stars Group will create a global leader in sports-betting and gaming. Here are some of the highlights of the combined group. pic.twitter.com/N6w6jMFVzx
— Flutter plc (@FlutterPLC) October 2, 2019
£5bn
Value of TSG under the deal, according to Bloomberg, a premium of about 40% on Tuesday’s closing share price. Brokerage firm Davy said Flutter paid a 2020 EV/EBITDA multiple of 10.3x pre-synergies or 8.8x including full annual synergies of £140m (to be captured by year three).
£3.8bn
Combined online revenues in 2018, compared to bet365 at c.£3bn in the comparable period and GVC’s £1.3bn.
20.43%
The rise in Flutter’s share price this morning at the time of writing to 9,194p on the London Stock Exchange.
25%
Estimated market share for the firm in the US betting market under the Fox Bet and FanDuel brands, according to Morgan Stanley. Davy noted the two brands were “among the most likely to succeed in the US”.
Davy said: “Each has: a valuable sports-led brand, an extremely relevant existing customer base (FoxBet via its media partnership); and a unique advanced acquisition strategy via other product verticals (fantasy and free-to-play respectively). Furthermore, FoxBet’s recreational focus will complement FanDuel’s more core-based proposition.”
£140m
Projected annual synergies to be realised by year three of the deal. “This looks conservative,” said Morgan Stanley. “This represents 3.5% of combined group revenues, which is below the ~10% average of precedent transactions. It also does not include interest savings from refinancing of TSG debt, or revenue synergies.”
Integration concerns?
The scale of the deal brings its own concerns. Both Paddy Power Betfair and Stars Group/Sky Betting & Gaming saw operational momentum stutter following their earlier deals and an integration of this scale could cause problems. “History for gaming mergers of this size have been quite eventful (read turbulent),” said broker Julian Buhagiar.
https://twitter.com/gamblinglamb/status/1179319966295830529
Which tech stack will the combined firm use?
Davy said Flutter will employ an “API-based approach”, where all brands will remain responsible for the front-end technology and each will then be plugged into Flutter’s back-end tech stack. This suggest it is the end of the road for Stars’ Global Sports Trading platform that was under construction.