The proposed $12.2 Billion takeover of PokerStars parent The Stars Group (TSG) by Flutter Entertainment is to come under the scrutiny of the UK’s antitrust regulator, the Competition and Markets Authority (CMA).
The planned all-share transaction would create an online gambling behemoth, the biggest e-gaming company in the world by revenue. Now, the CMA — which has the power to block the deal — will decide whether this will be to the detriment of the UK consumer.
Brands controlled by Flutter and TSG, including Paddy Power, Betfair, and SkyBet, collectively make up around 40 percent of Britain’s online sports-betting sector and around 26 percent of the overall online gaming market in the UK. Normally, a 25 percent share of any one market is enough to launch a CMA investigation.
Antitrust regulators like the CMA are charged with regulating mergers and acquisitions to prevent the creation of monopolies or companies that are too dominant within one market. This is to protect fair competition and consumer choice.
Paddy Power for Sale?
Competition authorities in Australia, where both companies own several brands, may also scrutinize the deal, although an analyst for the Royal Bank of Canada told The Financial Times Thursday he did not anticipate any problems in Canada, TSG’s home country.
But Flutter or TSG may well have to shed some of its brands in order to appease UK regulators. Canaccord Genuity has even suggested Paddy Power could be up for sale. The analyst has described the brand as the “logical choice,” considering the strategic importance of TSG’s operations in the US.
TSG signed a deal with Fox Sports in May last year that saw the broadcaster invest an initial $236 million in the group and the creation of Fox-branded online sports betting platform Fox Bet.
But could Flutter really divest itself of its flagship brand, especially considering its stated intention to move the enlarged group to Dublin, where Paddy Power is based?
$4.6 Billion in Revenues
Speaking to shareholders shortly after the merger was announced, Flutter CEO Peter Jackson said he was “confident” he could get deal signed-off with all the “the relevant approvals.”
“We are very respectful of the competition authorities,” he added. “We know they need to do their analysis.”
The two parties hope to close the deal in the second or third quarter of this year. They would be creating a group of companies with over 13 million active customers in more than 100 international markets and estimated annual revenues of £3.8 billion ($4.6 billion).
That would be around 50 percent higher than its closest rival, Bet365, and roughly twice those of GVC.