By Conor Humphries
DUBLIN (Reuters) - Betfair (L:BETF) and Irish rival Paddy Power (I:PLSA) have reached agreement on a 6 billion pound combination, first set out last month and designed to secure leadership of Britain's competitive online gambling market.
As in a provisional deal announced in August, Paddy Power shareholders will own 52 percent of the group with Betfair investors owning the rest, if the deal is approved by shareholders, Betfair said on Tuesday.
The betting sector has seen a string of deals this year, as companies respond to tighter regulation and higher tax bills in Britain and across Europe by looking to bulk up and better compete in an online market buoyed by the increasing use of mobiles and tablets.
Ladbrokes (L:LAD) and Gala Coral struck an all-share deal in July, while GVC Holdings (L:GVC) last week agreed to buy Bwin.party Digital Entertainment (L:BPTY).
Under the latest deal, shareholders of Betfair - an exclusively online business best known for technology which allows gamblers to bet against each other as opposed to taking odds offered by a bookmaker - will receive 0.4254 new shares in the combined group in exchange for each Betfair share.
Paddy Power shareholders will receive a special dividend of 80 million euros.
The new group, which will be called Paddy Power Betfair and whose stock market value would be some 6 billion pounds on the basis of the combined valuations of the two partners, will be market leader online in the UK with a share of 16 percent, according to industry data.
That would surpass a merged Ladbrokes Coral group on 14 percent, as well as William Hill (L:WMH) and privately owned Bet365.
Betfair chief Breon Corcoran, formerly chief operating officer at Paddy Power, will be CEO of the new group, which will have a premium listing on the London Stock Exchange and a secondary listing on the Irish Stock Exchange.
The combined group will target a dividend payout ratio of approximately 50 per cent of profit after tax, the statement said. Betfair said the deal was expected to secure recurring annual pretax cost synergies of approximately 50 million pounds.
Shares in the two groups, which had shot higher on announcement of the deal, were little changed on its confirmation on Tuesday.
Both brands will operate side by side in Europe and will operate Paddy Power's portfolio of almost 600 betting shops, more than half in Britain.
Paddy Power was advised by Morgan Stanley (N:MS) and IBI Corporate Finance on the deal. Betfair was advised by Goldman Sachs (N:GS).
($1 = 0.6502 pounds)