The Stars Group’s $4.7 bn Acquisition of Sky Betting & Gaming

By Marcus Falck, Isak Muhr (Stockholm School of Economics) 17/11/2018 |

 

Overview of the deal

  • Acquirer: The Stars Group Inc.

  • Target: Sky Betting & Gaming Ltd.

  • Estimated value: $4.7 bn

  • Announcement date: April 21, 2018

  • Acquirer Advisors: Deutsche Bank, Morgan Stanley, PJT Partners

  • Target Advisors: Goldman Sachs

The Stars Group Inc. (“TSG”) recently announced that the U.K. Competition & Markets Authority has cleared its acquisition of Sky Betting & Gaming (”SBG”) and they can now begin executing on its integration plans. In April this year, The Stars Group agreed to acquire SBG in a deal worth $4.7 bn, of which $3.6 bn is payable in cash and the remainder is payable in approximately 37.9 mn newly-issued common shares, thus creating the world’s largest publicly listed online gambling company. The deal was announced only two months after the rumors about the majority owner, CVC Capital Partners, had chosen Rothschild to examine a stock market listing (an IPO).


The Stars Group, primarily relying on online poker, has been looking to diversify its operation across different regions and products. ‘In-person’ gambling is illegal or highly regulated in most countries across the world which has resulted in providing significant growth opportunities for the global online gambling industry, which is forecasted to grow at a CAGR of 10 % in the near-term. This is because, let’s say, an online gambling company registered in, for example, Malta can operate in countries which do not allow "normal" gambling.

“This transaction creates the world’s largest publicly listed online gaming company and unites two iconic brand portfolios with strong technology platforms and teams. This significant scale also positions The Stars Group to both secure and expand upon its global footprint” –Rafael Ashkenazi, CEO of The Stars Group

Company details (Stars Group Inc.)

The Stars Group Inc. provides technology-based products and services to gambling and interactive entertainment industries around the globe. They own brands such as PokerStars, BetEasy and BetStars.

- Founded in 2001, headquartered in Toronto, Canada

- President and CEO: Rafael Ashkenazi

- Number of employees: 2,100

- Market Cap: $6.3 bn - EV: $8.6 bn

- LTM Revenue: $1.5 bn - LTM EBITDA: $560 mn

- LTM EV/Revenue: 5.8x - LTM EV/EBITDA: 15.4x

Company details (Sky Betting & Gaming)

Sky Betting & Gaming provides gambling services such as sports betting, online poker, bingo, and casino games primarily to customers in the United Kingdom but also in other European countries.

- Founded in 2001, headquartered in Leeds, United Kingdom

- President and CEO: Ian Proctor

- Number of employees: 1,400

- Market Cap: - EV: $4.7 bn

- LTM Revenue: $925 mn - LTM EBITDA: $294 mn

- LTM EV/Revenue: 5.1x - LTM EV/EBITDA: 16.0x

Note: Figures reported in GBP, converted using exchange rate as of announcement date, at £1:$1.3792


Projections and assumptions

Short-term consequences

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