Flutter Entertainment, the parent company of Paddy Power Betfair, has agreed a deal to acquire all of the shares in The Stars Group (TSG) and merge with the operator to form a combined business with annual revenue of £3.8bn (€4.3bn/$4.7bn).
Under the agreement, which would create the largest online betting and gaming operator globally, Flutter would exchange 0.2253 new shares in exchange for each TSG share, with Flutter shareholders owning approximately 54.64% of shares in the combined business and TSG shareholders 45.36%.
Flutter and TSG said that the merger would deliver substantial value creation for shareholders from pre-tax cost synergies of £140m per year, as well as potential revenue cross-sell in international markets and lower finance costs.
The two operators also expect the combination to deliver a post-tax return on invested capital that exceeds Flutter’s cost of capital by the end of the third full financial year post completion. Strong free cash flow generation is also expected as a result of the deal.
The combined business would have a diversified geographical footprint and, by offering sports betting, poker, casino, fantasy sports and free-to-play games, a wide product range.