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Flutter Closer to Stars Group Acquisition This Quarter
What started as a huge industry announcement in October 2019 is now closer than ever to becoming a reality. Flutter Entertainment may be able to complete its acquisition of The Stars Group by the end of June – still in the second quarter – of this year.
Approvals from regulators around the world provided the go-ahead in major countries like the UK and Australia, and now shareholders are giving their go-aheads as well. Flutter shareholders voted overwhelmingly to approve the merger, and The Stars Group did the same later this week.
Meanwhile, The Stars Group has done some rebranding ahead of the merger. And Sportsbet is preparing to absorb BetEasy.
Shareholders Say Yes
On April 21, Flutter Entertainment held an “extraordinary general meeting” to vote on five resolutions pertaining to the Flutter-Stars Group combination. Each passed with more than 99% of the votes representing 49,548,888 of shares.
The resolutions approved were:
- To approve the all-share combination
- To authorize directors to allot shares
- To increase the maximum number of directors
- To approve the capitalization of the merger reserve account balance
- To approve a reduction in company capital
On April 24, The Stars Group (TSG) released a statement to note that 99.99% of shares voted in favor of the special resolution approving the “arrangement.”
First Quarters Positive for Both
Flutter released its first-quarter revenue numbers last week and showed a 16% year-on-year revenue growth to £547 million (up from £478 million).
Total revenue had been up 29% and sports revenue up 30% prior to May 15. But the stoppage of almost every major sport in the world due to the global coronavirus pandemic put a damper on those results. The final sports betting number was only up 13% for the quarter.
TSG offered a look at its first quarter last week as well, and its year-on-year increased was 27% over the previous year with $735 million in revenue (up from $580 million).
That record revenue was supported by momentum in the UK and Australia segments despite the mid-March coronavirus hit. Growth had been projected at 44% year-on-year before the sports stoppage. Online poker and casino games increased significantly over the last weeks of March, though, helping to mitigate the losses from sports betting.
Australia Q1 Figures Solid
Flutter specifically noted that its revenue in Australia was up 32% for Sportsbet, driven by customer growth, favorable sports betting results before the shutdowns, and ongoing structural improvements in margin. Stakes also grew 3% despite the reduction in customer recycling.
TSG stayed notably stagnant in the Australian market in the first quarter, with revenue of $61 million down 2% from previous year. They did note that stakes were up 5% and constant currency revenue was up 6%.
Final Regulatory Approvals Noted
In mid-February, Flutter reported that the merger received the approval of the Australian Competition and Consumer Commission (ACCC). The deal passed all ACCC requirements and solidified the largest potential obstacle in the Australian market.
TSG noted in its Q1 update that the UK Competition & Markets Authority unconditionally cleared the Flutter-TSG merger in its Phase I review under the 2002 Enterprise Act. And Flutter noted that the Irish Competition and Consumer Protection Commission submitted its approval just the day before the quarterly figures were released.
Flutter CEO Peter Jackson noted the importance of product and geographic diversification. “As such, the strategic logic of our combination with The Stars Group remains compelling.”
There seem to be some outstanding regulatory decisions, but they are expected in the coming weeks.
Sportsbet to Replace BetEasy
The Australian Business Review reported this week that BetEasy will officially close, and Sportsbet will replace it. This is not a move that shareholders expected, as the two companies – Flutter and TSG – originally planned to run a “dual brand strategy.”
The companies said they are likely to complete the replacement of BetEasy by the time the Spring Carnival starts in October 2020.
Sportsbet will be able to garner an even higher percentage of the market as compared to Tabcorp. Sportsbet CEO Barni Evans said the merger is the best way to deliver the best products and service to customers. “We are now intending to pursue a single brand strategy principally because of the ongoing volatility to sporting competitions around the world and the wider economy stemming from COVID-19.”
The move will bring several deals together, including BetEasy’s AFL partnership and US National Basketball Association, as well as dual Racing.com sponsorship agreements that will be negotiated and combined.
BetStars to Rebrand
It seems that The Stars Group is also making a branding change for its rising sports betting sector. It has been BetStars since its launch, but Poker Industry PRO reported that TSG changed it to PokerStars Sports.
Players on the UK and Spanish sites have already noticed the domain change. And the link to sports wagering on PokerStars already shows the new PokerStars Sports logo. And while the corporate TSG website reflects the change, the April 24 press release about the shareholder vote did not reflect the change.
A Q2 investor call last year hinted at the change, and it has now been in the works since. CEO Rafi Ashkenazi then indicated the reason would be to showcase PokerStars “as the master brand” and to make marketing more efficient.
Due Date for Merger?
Both Flutter and TSG have indicated that they intend to complete the deal by the end of June 2020. This would put it into Q2 and allow changes to begin as the world will still be emerging from its coronavirus shutdowns around the world.
Many analysts believe there are a handful of smaller regulatory approvals pending. When those become formal, the acquisition/merger will move into its final phase.