Paddy Power and Betfair outline proposed merger plans

26 August 2015

Paddy Power and Betfair have agreed a deal in principle to merge and form a new combined company.

Should the deal go ahead, both operators said ‘Paddy Power Betfair’ would become one of the world’s largest public online betting and gaming companies.

Under the agreement, Paddy Power shareholders would own 52% of the firm, with Betfair shareholders owning 48% of the issued share capital in the new combined company.

Upon completion, Paddy Power shareholders would receive a special dividend of €80 million ($92 million).

Gerry McGann, who last month took over as chairman of Paddy Power, would serve in the same position at the company, with Betfair chief executive Breon Corcoran also taking up the same role.

In addition, Paddy Power’s chief executive Andy McCue would become chief operating officer and an executive director, while Betfair chief financial officer Alex Gersh would retain his role and serve as an executive director.

Paddy Power Betfair’s board of directors would also include other non-executive directors nominated equally from each of Paddy Power and Betfair.

“The possible merger would create one of the world's largest public online betting and gaming companies by revenue with enlarged scale, capability and distinctive and complementary brands,” Paddy Power and Betfair said in a joint statement.

“The combination has compelling strategic logic and represents an attractive opportunity for both companies to enhance their position in online betting and gaming and to deliver synergies, customer benefits and shareholder value.”

The potential merger comes at a time when a number of other major operators are considering similar deals.

Ladbrokes and Gala Coral are expected to complete their proposed merger in the near future, while bwin.party is currently the subject of a bidding war between 888 and GVC Holdings.

Confirmation of the potential merger came as Paddy Power and Betfair revealed year-on-year growth in their latest financial results this (Wednesday) morning.

For the six-month period through to June 30, Paddy Power posted net revenue of €527.8 million, an increase of 33% on the €396.5 million recorded in the first half of last year.

Operating profit was also up 33% on a year-on-year basis to €80.1 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) hiked 27% to €106.1 million.

Reflecting on the results, chief executive McCue said: “We have made substantial progress implementing the strategy we set out in March, with further payback to come from new mobile product releases, refreshed marketing campaigns and efficiency gains.

“We now expect full year 2015 reported operating profit to be a mid to high single digit percentage above 2014 and the consensus market forecast.”

Meanwhile, revealing its financial results for the three months through to July 31, Betfair announced that it achieved revenue of £135.4 million, which represents an increase of 15% on the £117.3 million posted in the corresponding period last year.

While sports betting remains the company’s main source of income, contributing £89.9 million to the total revenue figure, Betfair’s US business experienced the most growth in the quarter, with revenue from this division up 42% year-on-year to £20.1 million.

Betfair’s gaming arm also posted a 27% year-on-year jump in revenue during the first quarter.

Commenting on the results and the potential merger, chief executive Corcoran said: “Betfair's current momentum is strong and the business remains well placed to execute against our strategy and to continue to deliver profitable growth

“The proposed merger with Paddy Power is hugely exciting; it would create a truly global sports betting group with unmatched products and talent, and significantly enhanced scale.

“The combined business would be one of the world's largest online sports betting operators, with revenues totalling more than £1 billion.”

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