- »What Role Did Caledonia Play in Flutter-TSG Deal?
What Role Did Caledonia Play in Flutter-TSG Deal?
The deal is huge.
Flutter Entertainment announced it would acquire The Stars Group in a deal worth nearly £10 billion. The result will be a “global leader in sports betting and gaming.”
Some believe an Australian investment banker named Will Vicars had quite a role in making it happen.
The Flutter-TSG Deal
On October 2, the announcement reverberated around the world. Flutter Entertainment, formerly PaddyPower Betfair, agreed to acquire The Stars Group (TSG), parent company of PokerStars.
When the deal is complete, Flutter shareholders will own 54.64% of stock, and TSG will own the rest.
The combination of the companies, reportedly valued at £9.8 billion, expects to show pre-tax cost synergies of £140 million per year. In addition, there should be revenue boosts from cross-promotions and lower finance costs.
Moreover, the combined companies will cover more ground in the online gaming and sports betting arena on a global scale. Flutter aims to gain a more significant influence in markets outside of Europe, the United States, and Australia, where The Stars Group has been shone to have six times more influence.
Together, the companies will cater to approximately 13 million customers in more than 100 betting markets.
The acquisition must now obtain approval in numerous markets from regulators and government agencies. The countries involved include the Flutter’s base in Ireland, The Stars Group’s base in Canada, the UK, US, Canada, and Australia.
This puts the anticipated completion date of the deal in the second or third quarter of 2020.
Influence of Will Vicars
According to a piece published in the Sydney Morning Herald, Vicars had quite a lot to do with the Flutter-TSG deal.
Vicars serves as Chief Investment Officer at Caledonia Investments and holds a seat on the Board of Directors. He has been with the firm since 1998, based out of his home in Sydney, where there is also a Caledonia office.
Vicars and co-CIO Mike Messara had significant stakes in both Flutter and TSG. Caledonia owns 19.5% of The Stars Group and an 8% investment in Flutter.
Economics and markets writer Elizabeth Knight believes they helped facilitate the massive gambling company deal behind the scenes.
The two predicted the companies would eventually merge. Caledonia reported to investors that it had pegged Flutter and TSG as an ideal combination for global growth several years ago. “We then began a comprehensive and in-depth research effort to study all companies and all parts of the global online gambling value chain. This culminated in our investments in The Stars Group and Flutter,” as Caledonia reported.
Caledonia also helped build the two companies into their current positions of being ripe for the merger. Caledonia had taken positions in SkyBet in the UK, the acquisition of which was announced by TSG in April 2018. The $4.7 billion deal was completed less than three months later.
Another uncoincidental position was Caledonia’s position in FanDuel in the US market. When Flutter was PaddyPower Betfair, it revealed its intention to buy fantasy sports giant FanDuel in May 2018. That deal, too, was completed by the end of July 2018.
Making of a Merger
Vicars and Messara saw the potential of each company – Flutter and TSG – but even more potential in the two giants as one.
The two investors “helped to nurture” the Flutter-TSG deal.
Not technically a partner, Caledonia does see itself as a strategic partner to management teams in some ways, especially when it comes to pursuing a merger or acquisition “where the industrial logic is so compelling.”
Caledonia sees great potential in the movement of sports betting online rather than in live venues. And the momentum of sports betting via apps and online sites is no more prominent than in the US market, where states are legalizing sports betting and expanding consumer options at an ever-quickening pace.
Vicars is also one who sees the opportunities involved in cross-selling and cross-promoting across the online poker, online casino, and sports betting sites. A dominating presence in all three realms will pay off, Caledonia hopes, as the companies truly merge after the deal’s completion.
Australian Market Included
Some of the appeal of the deal for Vicars could involve its pertinence to the Australian market.
The Flutter-TSG merger will give Sportsbet and BetEasy a larger percentage of the Aussie gaming market, which is worth approximately $4.3 billion in revenue. Some analysts believe the new Flutter-TSG company will have 26% of the market share.
This could present a challenge to an approval in Australia, though. Antitrust reviews are going to take this market share into consideration when deciding if it will approve the deal.
Some say the UK Gambling Commission will be the biggest antitrust hurdle, but others put the focus on the Australian Competition and Consumer Commission.
Caledonia clearly has faith in the deal. It has backed deals from the real estate merger of Zillow and Trulia to the one merging the Australian Stock Exchange and Sydney Futures Exchange.