Flutter and Stars confident of regulatory approval for merger

2 October 2019

Board members at Flutter and The Stars Group further outlined the details of the synergies from the companies’ mega-merger, while also assuring stakeholders that the deal would pass any competition-related hurdles.

In a conference call with investors and analysts, members of the board of the proposed combined business explained the deal in further detail and answered further questions about the agreement that would create the largest betting company in the world.

The deal will be examined by competition authorities such as the UK’s CMA, which typically investigates any merger where combined UK turnover exceeds £70m (€78.6m/$86.0m) or combined market share exceeds 25%. However, although the companies combine for 40% of the UK market, Flutter chief executive Peter Jackson, who would assume the same role at the combined business, said he believed that there should not be any concerns about passing competition checks in the country.

“We’re very respectful of the competition authorities such as the CMA in the UK,” Jackson said. “We look forward to working with them in due course and we are confident that we will receive the relevant approvals in due course.”

Jackson added that there should be no concern in Australia either, where Flutter’s Sportsbet.com.au and the Stars Group’s BetEasy currently compete with the larger  Totalisator Agency Board (TAB).

“We are very respectful; we know what we need to do in Australia and will work and engage with them in due course,” Jackson said. “We both run brands in Australia that are trying to take on the might of the TAB, they’re the behemoth in the market and we’re just small corporate bookmakers nipping at their heels.”

The board members also expanded upon the £140m worth of annual cost synergies from the deal, with Jackson said would not include any synergies in the United States.

“You should think of the synergies as roughly something like 20% corporate, 20% Australia and 60% UK and international, which is kind of how Flutter is structured at the minute,” Jackson said. "In the US, we’re not assuming any synergies. It’ll be the opportunity to avoid costs going forward rather than creating synergies there.”

Jackson said a large amount of the synergies would come from the use of Flutter’s back-end technology stack, while brands would still be able to use their own front-end stack in order to maintain brand identity.

“If I look at how me manage integration, we effectively had to turn the Betfair technology stack into something that could operate on a multi-brand multi-jurisdictional basis and we then migrated all of Paddy Power,” he said. “That was a very complex thing to do, We’ve actually been able to separate our front-end and back-end platforms and that will allow us under this transaction to effectively allow teams with their own front-end platforms to maintain their product roadmaps but use our back-end betting platform and our global risk trading capability.

"We think that should maintain momentum into the business, maintain individual identities of each brand but still deliver considerable cost savings.”

However, Rafi Ashkenazi, chief executive of the Stars Group, said that despite the synergies, the deal was primarily about growth.

“This is about driving growth into the business,” Ashkenazi said. “Cost synergies are important but they’re not why we’re doing this deal.”

Jackson also said that the new company would not be withdrawing from any unregulated markets where The Stars Group may do business.

“The Flutter business operates in a hundred markets around the world and the board is comfortable in all those markets,” Jackson said. “There’s nothing we’ve seen from The Stars Group that gives us cause for concern in any of these markets.”

“There is no market that is unregulated that takes up more than 3% of the combined group’s earnings.”

In addition, Jackson said the company’s strategy with operating multiple brands in the same jurisdiction will remain similar to how it acts currently in operating brands such as Paddy Power and BetFair in the UK.

“We’ve had a lot of experience of operating a multi-brand strategy and the way we want to continue to do it in the US is to maintain the purity in terms of customer databases,” Jackson said. “We have many customers who play daily fantasy sports on fanduel and we plan to cross-sell those players into sports betting, gaming and horse racing as appropriate, but we don’t try to move players from Paddy Power to Betfair and we won’t try to move players between any of these new brands.”