In a move that will shake up the worldwide gaming industry, Flutter Entertainment announced its plan to take over The Stars Group, creating the largest online betting company in the world. The move is not yet official, but upon consummation Flutter shareholders will own 54.6-percent of the combined company, with The Stars Group holding the remaining 45.4-percent. Together, the merged companies account for $4.68 billion in annual revenue.
The consolidation is a race to the top as legal sports betting rapidly expands across the United States. To understand how each of these companies came into this position, a plethora of mergers and acquisitions must be peeled back and revealed. Already under the Flutter umbrella is both FanDuel and Paddy Power, while The Stars Group is the owner of PokerStars and Sky Betting & Gaming.
The Stars Group is also partnered with FOX Sports to roll out the newly minted FOXBet mobile betting app. The FOXBet app is a play on the wildly successful SkyBet that allows viewers in the United Kingdom to bet on a variety of in-game propositions. FOX Sports partnered with The Stars Group in May of 2019, and the biggest news here for U.S. consumers is the pairing of FOX Sports with FanDuel.
This merger is all about positioning to take advantage of new money that will flood the market as legal sports betting comes offshore and into the United States. One area that has not been legalized as rapidly as sports betting is online poker and the merger will be set to profit from another influx of money in the online poker business.
Inside the Numbers
Before the merger was announced, Flutter Entertainment and The Stars Group were competitors. Rather than continue to compete, the two companies wisely decided that a merge would better position the both entities to profit from a rapidly growing online gaming market.
The consolidation does much more for both companies than just put them in a position to profit from new markets though, as economies of scale are estimated to save $172.5 million by the third year. The dollar details are that Flutter will buy The Stars Group in a all-stock acquisition for $12.25 billion. The companies expect that the merger will increase Flutter’s earnings per share by 50-percent in the following year.
Flutter bought FanDuel for $465 million in July of 2018, and this new merger will allow FOX Sports the opportunity to buy 18.5-percent of FanDuel in 2021. The idea is that FOX will have every incentive to promote FanDuel as much as possible with their media platform to increase its value.
What is The Stars Group?
The Stars Group is a collection of gaming companies. These include: PokerStars, BetStars, Full Tilt, Sky Bet, Sky Poker, Sky Vegas, Sky Casino, etc. The list goes on and on, but you get the picture. From their website, “The Stars Group is a global leader in the online and mobile gaming and interactive entertainment industries.”
A History of Flutter Entertainment
Flutter was originally known as Paddy Power, a merger of three bookmaking chains in Ireland which came together in 1988. Five years later, Sportsbet was separately founded as the first licensed bookmaker in Australia.
Paddy Power would go on to acquire Sportsbet in 2009. But before that could happen, the Betfair betting exchange launched in 2000. In 2002, Betfair acquired Flutter, a rival betting exchange.
After their acquisition of Sportsbet, Paddy Power became the first betting company with a mobile app in 2011, the same year that Betfair appeared on the London Stock Exchange. In 2016 Paddy Power and Betfair joined forces, and two years later, the company bought FanDuel.
Once fully merged, the new company plans to offer a full collection of gaming offerings ranging from fantasy sports to online poker, sportsbooks, casino games and horse racing. Combined, the two companies already serve 4 million customers in over 100 countries. This number should skyrocket once the majority of U.S. states are on board with legal sports betting.
The stock prices for both Flutter and TSG rose rapidly following the announcement. Flutter (symbol: PDYPY) was up 15% early in the day on Wednesday, October 2 and is up 10.94% overall since October 1. The Stars Group shares rose at an even higher rate. On October 1, the stock was trading at $15.31, reaching as high as $20.92 after the announcement. It has since settled at $19.94 as of October 9, 2019.
This opens up all kinds of FanDuel and Draftkings announcements in the future, so be ready.