Betfair, Paddy Power reach agreement to merge, as consolidation grips online gaming

Betfair Group Ltd (LON:BET) and Paddy Power plc today announced they have reached an agreement on the key terms of a merger, that will lead to the creation of a combined group named Paddy Power Betfair plc.

The possible merger is set to create a major group in the industries of online betting and gaming.

Today’s announcement by Paddy Power and Betfair comes at the backdrop of what seems to be a wave of M&A in the online gaming sector. Another deal in this segment that has attracted particular attention is the planned acquisition of Digital Entertainment Plc (LON:BPTY), the parent of CFD broker InterTrader. Whereas in July this year, Bwin reached an agreement with 888 Holdings Public Limited Company (LON:888) on a deal and still recommends that offer, GVC Holdings PLC (LON:GVC) has emerged as a very ambitious bidder and talks on a possible deal continue.

 Key terms of the proposed Paddy Power – Betfair merger:

  • Paddy Power shareholders would own 52% and Betfair shareholders would own 48% of the issued and to be issued share capital of the Combined Group;
  • Immediately prior to completion, Paddy Power shareholders would receive a special dividend of €80 million ($91.3 million);
  • Gary McGann, Chairman of Paddy Power, would become Chairman of the Board of the Combined Group;
  • Breon Corcoran, CEO of Betfair, would become CEO of the Combined Group. Andy McCue, CEO of Paddy Power would become COO and an Executive Director of the Combined Group. Alex Gersh, CFO of Betfair, would become CFO and an Executive Director of the Combined Group;
  • The Board of Directors of the Combined Group would also comprise other non-executive directors nominated equally from each of Paddy Power and Betfair; and
  • The structure of the Possible Merger is being finalised with a view to maximising benefits to shareholders and other stakeholders, and it is expected that the Combined Group will maintain a significant presence in Ireland and in the UK.

Strategic Rationale for the Possible Merger:

  • Creation of one of the world’s largest public online betting and gaming companies with revenues of over £1.1 billion ($1.73 billion) in their last financial years;
  • The Combined Group’s scale and capabilities would leave it better placed to compete in existing and new markets;
  • Dual brand strategy in Europe utilising the distinctive and complementary brands of Betfair and Paddy Power;
  • Complementary online business and geographic mix;
  • Diversified group with strong platforms across online and retail in the UK and Ireland, and attractive international growth opportunities in Continental Europe, the US and Australia;
  • Cost and revenue synergies from efficiencies which reflect the complementary nature of the businesses and through leveraging of the Combined Group’s enlarged scale.

To view the official filing with the LSE, click here.

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