FanDuel Parent To Buy The Stars Group, Create World’s Largest Online Gambling Firm

On Wednesday, a massive all-stock acquisition of The Stars Group by FanDuel-owner Flutter Entertainment was announced.

A massive deal was announced early Wednesday that will create what is said to be the world’s largest online gambling company. It will send shockwaves through the nascent U.S. sports betting industry.

Flutter Entertainment, owner of prominent online gambling brands Paddy Power, Betfair, and FanDuel, has agreed to acquire The Stars Group, owner of the world’s leading poker platform, PokerStars. TSG, through a deal with FOX, also operates the emergent FOX Bet sports betting platform in the U.S. TSG was recently offering the now-defunct BetStars online/mobile sports gambling platform.

FanDuel and FOX Bet are two leading U.S.-facing platforms that are both online in New Jersey and Pennsylvania — and both brands are expected to launch in states across the U.S. pending legalization and/or regulatory approval. The U.S. sports betting market represents a $16-18 billion opportunity in terms of gaming revenue — and more than double that in terms of total economic output.

Prior to PASPA’s demise in May 2018, Americans were wagering around $150 billion each year on sports, according to the American Gaming Association. Nearly all of that was through illicit channels. A mature legal U.S. betting market could see around $280 billion in annual betting handle, according to Oxford Economics. That’s sports only, and there’s much more on the table if more states authorize iCasino.

All-stock deal

The combined Flutter/TSG company is worth a whopping $12 billion based on last night’s closing prices.

A presser announcing the deal stated that once the deal is complete, Flutter shareholders will own 54.64% of the combined company, while TSG shareholders will own 45.36% of the share capital.

The combination is expected to create pre-tax cost synergies of £140 million, the companies said.

In 2018, the combined group’s annual revenue would have been £3.8 billion, the companies said.

Executives with both companies will comprise a 14-person board for the combined group.

U.S. opportunity

One executive said in the presser that the deal will “turbocharge” opportunities in emerging markets. The combination will generate a pool of 13 million online gamblers across more than 100 markets, according to an investor presentation. That’s just the tip of the iceberg, especially in the U.S., as online/mobile sports wagering is active in just a handful states.

Here’s a look at all the brands under the umbrella of the combined group:

The combination is a complex one thanks in part to existing deals in the U.S. market.

“In order to achieve economic alignment of Flutter’s and TSG’s strategic third-party relationships across their respective U.S. businesses, Flutter has entered into arrangements, conditional on completion of the combination, with FOX Sports (TSG’s U.S. media partner for FOX Bet), Fastball Holdings LLC and Boyd Interactive Gaming LLC (together Flutter’s co-shareholders in FanDuel Group),” said the presser.

FOX Sports will have the right to acquire about 18.5% of FanDuel at its market value in 2021.

Furthermore: “Fastball and Boyd will receive a total payment of 12.5% of the increase in FOX Bet’s market value between completion of the combination and the exercise of Flutter’s option to acquire Fastball’s remaining equity interest in FanDuel Group in July 2023.”

The deal is subject to regulatory approval in many markets, including states in which the company will offer online/mobile gambling. Online gambling is not regulated on the federal level in the U.S.

Peter Jackson, CEO of Flutter said of the U.S. market: “The combination represents a great opportunity to deliver a step change in our presence in international markets and ensure we are ideally positioned to take advantage of the exciting opportunity in the U.S. through a media relationship with FOX Sports as well as our development of U.S. sports betting through Flutter’s FanDuel and TSG’s FOX Bet brands. We are committed to these two high quality brands to drive the growth of the combined group in the U.S.”


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