By Graham Fahy
DUBLIN (Reuters) - The owner of Paddy Power Betfair has agreed to buy the company behind Poker Stars in a $6 billion share deal to create the world's largest online betting and gambling company by revenue, seeking to take advantage of the opening up of U.S. markets.
Flutter Entertainment (I:FLTRE) (L:FLTRF), formerly known as Paddy Power Betfair, is to combine with Nasdaq- and Toronto-listed Stars Group Inc (TSG) (TO:TSGI), owner of Poker Stars, the companies said on Wednesday.
U.S.-listed TSG shares soared 50% in premarket trading after the deal was announced. Shares in Flutter jumped 20 percent, while gambling rivals GVC (L:GVC) and William Hill (L:WMH) were also lifted by the prospect of further consolidation.
The merger is the latest in a series of deals as the industry responds to the growing number of gamblers using online and mobile devices and the opportunity created by the relaxation of rules on sports betting in the United States.
Combined annual revenues would have totalled 3.8 billion pounds ($4.7 billion) in 2018, making Flutter-TSG the largest online betting and gaming operator globally, the companies said.
Flutter CEO Peter Jackson, who will retain his role in the combined group, said the deal would "turbocharge" Flutter's existing strategy and "provide world-class capabilities across sports betting, gaming, daily fantasy sports and poker, as well as greater geographical and product diversification."
The merged group will have its headquarters in Dublin and its main listing in London.
Shareholders in Flutter would own approximately 54.64% of the new company, with TSG shareholders owning the remainder.
FOX BACKING
The merged group will be boosted by a partnership in the United States with FOX Sports, which will have the right to acquire an 18.5% stake in Flutter's FanDuel U.S. business from 2021.
"We're excited to be able to expand our partnership into FanDuel, which together with FOX Bet, will be a leader in sports wagering in the U.S.," said Fox Corp CEO Lachlan Murdoch.
The Murdochs' Fox Corp (O:FOXA) launched the FOX Bet sports betting platform last month in New Jersey in partnership with The Stars Group.
Dublin-based Flutter merged its U.S. business with fantasy sports company FanDuel last year in a deal it said would create the industry's largest online business in the United States.
TSG had bolstered its British operations last year when it bought Sky Betting & Gaming in a $4.7 billion deal.
Flutter has sharpened its focus on North America as the potentially huge U.S. market opens up and it faces higher taxes and increased regulations in its main British, Irish and Australian markets.
The combined group will serve customers in more than 100 countries. Around half of its current income is generated in Britain and Ireland, with 15 percent in Australia, 5 percent in the United States and 31% from the rest of the world.
Betting exchange Betfair and Paddy Power, which runs high street betting shops as well as an online business, merged in 2016, although the integration took longer than anticipated and a toll on product investment for a time.
The merger is expected to deliver pretax cost synergies of 140 million pounds per year, along with opportunities to cross-sell products to one another's customers in international markets and lower finance costs, the companies said.
The deal is also expected to boost Flutter's underlying earnings per share by at least 50 percent in the first full financial year following completion.
Under the terms of the merger, TSG shareholders will be entitled to 0.2253 new Flutter shares for each TSG share.