U.K., Irish Firms Agree $8 Billion Sports-Betting Merger
August 26 2015 - 4:40AM
Dow Jones News
LONDON—Paddy Power PLC and Betfair Group PLC have agreed to a
near $8 billion merger to create an international sports-betting
and online-gambling group with leading positions in the U.K., other
parts of Europe and Australia.
Shareholders in Dublin-listed Paddy Power would own 52% of the
merged company and receive an €80 million ($89.3 million) special
dividend, while London-listed Betfair's shareholders would own 48%,
the companies said on Wednesday.
Paddy Power is one of the largest bookmakers in the U.K.,
Ireland and Australia in revenue terms and operates in Italy,
France and Canada, according to its website. Betfair was launched
in the U.K. in 1999 and floated on the London Stock Exchange in
2010. The companies have combined revenue of around €1.5
billion.
News of the proposed tie-up comes amid a flurry of consolidation
in the sector, particularly in the U.K. where the government has
imposed a new tax on online gambling. Regulations for online
betting have also tightened elsewhere in Europe, constraining
growth and focusing companies' attention on how to lower costs.
Online gambling groups Bwin. Party Digital Entertainment PLC and
888 Holdings PLC announced a merger in July. Betting shop operator
Ladbrokes also said last month that it will merge with Gala Coral
in a stock deal that will create a betting and gaming company worth
around £ 2.3 billion ($3.7 billion).
Investors liked the odds of the Paddy Power-Betfair merger being
a success. Shares in Paddy Power rose more than 18% while Betfair
shares jumped 17% in early trading.
"The combined group's scale and capabilities would leave it
better placed to compete in existing and new markets," the
companies said. The companies plan to keep their separate brand
names.
The structure of the possible merger is still being completed
though the companies have agreed on who would run the combined
group, they said. Paddy Power Chairman Gary McGann would chair the
merged company whose chief executive would be Breon Corcoran,
currently Betfair's CEO.
Citi analyst James Wheatcroft said he wasn't surprised by the
proposed merger, which comes after the imposition of a new online
gambling tax in the U.K. The new levy has "triggered a financial
and strategic rationale" for consolidation in the sector, Mr.
Wheatcroft said.
Wednesday, Paddy Power also reported a 31% rise in pretax profit
for the six months ended June 30 to €80.5 million from €61.6
million the previous year and said full year operating profit is
"expected to be ahead of 2014 and the consensus market
forecast."
Betfair reported a 15% rise in revenue for the quarter ended
July 31 from the same period last year to £ 135.4 million.
Write to Rory Gallivan at rory.gallivan@wsj.com
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(END) Dow Jones Newswires
August 26, 2015 05:25 ET (09:25 GMT)
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