Flutter's $6bn Merger with The Stars Group

By Gustaf Baavhammar and Chris Leung (University of Warwick), Adam Butlin and Ilya Korzinkin (UCL) - Date: 20/10/2019


Overview of the deal

  • Acquirer: Flutter Entertainment (LSE: FLTR)

  • Target: The Stars Group (NASDAQ: TSG)

  • Estimated value: $6 billion

  • Announcement date: 2/10/2019

  • Acquirer Advisors: Goldman Sachs, PJT Partners 

  • Target Advisors: Barclays, Moelis & Company, BMO Capital Markets 

Where traditional gambling landmarks like Macau or Las Vegas have struggled for organic growth, M&A activity has picked up significant traction over the recent years as a result. Regulation also continues to be an overbearing incentive for takeovers as key players seek to reduce customer acquisition cost and achieve economies of scale to protect profitability margins. 

The global gaming industry is worth an approximate $450 billion with a long runway of growth still available. The deal unites two of the biggest brands in online betting, creating a global leader in sports betting and gambling as they gear up to dominate the fast growing sports gambling market in the US. Of the $450 billion in gross revenues generated in 2018, 11% originated from the online sector, having grown at an overall CAGR of 12% over the last 5 years. It is evident that both Flutter and TSG believe that the online sector continues to exhibit structurally attractive characteristics that warrant such a mega-merger and the migration of customers from retail to online platforms will remain a key driver.

Under the terms of the deal, Flutter will offer 0.2253 shares for each TSG share in a merger that will see Flutter shareholders take control of 54.64% of the NewCo, whilst TSG assuming the remaining 45.36% – valuing the NewCo at £9.8 billion or £14.2 including debt.

“We believe the combination of Flutter and TSG will deliver substantial value for shareholders. We will have an exceptional portfolio of leading recreational brands and best-in-class products on industry-leading technology platforms.” – Flutter CEO Peter Jackson 

Company Details (Flutter Entertainment)

Flutter is a global sports betting and gaming operator that focuses on 4 primary divisions: Online (encompassing Paddy Power, Betfair and Adjarabet), Retail (over 620 Paddy Power betting shops across the UK and Ireland), Australia (Sportsbet) and U.S. (FanDuel Group).

- Founded in: 2016, following a merger between Paddy Power and Betfair

- CEO:  Peter Jackson 

- Number of employees: 7,503 

- Market Cap: £5.91 billion - EV: £6.7 billion

- LTM Revenue: £2.03 billion - LTM EBITDA: £432 million

- LTM EV/Revenue: 3.30x . - LTM EV/EBITDA: 15.51x

Company Details (The Stars Group)

The Stars Group is a global leader in the gaming and online gambling industry operating poker, casino and sportsbook services through its Stars Interactive Platform. TSG also runs live poker tours and championship events such as the No Limit Hold’em Championship and the European Poker Tour.

- Founded in: 2001 

- CEO:  Rafael Ashkenazi

- Number of employees: 4,500

- Market Cap: $5.68 billion - EV: $10.6 billion

- LTM Revenue: $2.44 billion - LTM EBITDA: $604 million