- »Flutter-TSG Merger Receives Preliminary ACCC Approval
Flutter-TSG Merger Receives Preliminary ACCC Approval
When Flutter Entertainment announced its intention to acquire The Stars Group on October 2, 2019, the news took the gambling world by storm. Many countries to be affected by the merger, and their regulatory bodies had to approve the deal before it could move forward.
This week, the companies received one of the most anticipated approvals, that of the Australian Competition and Consumer Commission. While there was no official notice published, Flutter was notified of its informal approval.
Flutter Entertainment announced its intention to acquire The Stars Group (TSG) last year in a deal that will create a company with a combined worth of £9.8 billion.
The company formerly known as Paddy Power Betfair wants to take 54.64% of the combined stock, with the rest reserved for TSG, the parent company of PokerStars and Sky Betting & Gaming. And the singular entity would be a “global leader in sports betting and gaming,” according to Flutter, complete with approximately 13 million customers in more than 100 betting markets around the world.
While the original announcement reported an anticipated close of the deal in the second or third quarter of 2020, all hinged on the approvals of a number of regulators in key countries.
One of those countries was Australia, due to Flutter’s prominence in the Australian betting market. The Australian Competition and Consumer Commission (ACCC) needed to give its approval for the acquisition to move forward.
Informal Approval Granted
On February 18, the Irish Times reported that Flutter received informal approval for the deal. It was notified by the ACCC that it passed all of the requirements.
According to a Davy research note, “Alongside the UK, Australia was identified as a jurisdiction where the business combination was expected to be most heavily scrutinized. Accordingly, its successful conclusion is positive, with a potential obstacle to the completion of the acquisition now successfully navigated.”
The official approval will still be required, as will the approval of the Australian Foreign Investment Review Board (FIRB).
The FIRB advises the Treasurer and Government on Australia’s Foreign Investment Policy and its administration. The Treasurer makes final policy decisions, but the FIRB examines proposed investments in Australia and makes its recommendations. Every piece of the Flutter-TSG merger must be compliant with the Foreign Acquisitions and Takeovers Act of 1975.
Meanwhile in the UK
Since Flutter is based in Ireland, Sky is based in the UK, and TSG has offices on the Isle of Man – not to mention the massive amount of business all companies do in the UK – the deal will require approval from the UK’s Competition and Markets Authority (CMA).
Interestingly, the announcement from the CMA just came in early February 2020, months after the announcement of the acquisition intent.
The CMA decided to probe the merger on February 4, noting:
“The CMA is considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”
Just this week, the CMA closed the public comment period on February 18. This puts the consideration all in the hands of the CMA, to decide whether to deny the merger or refer it to Phase 2 of the investigation.
Per the CMA, the deadline for this part of the process is March 31, 2020. If it moves to Phase 2, the timetable will be announced at that time.
Business as Usual
As the investigations continue, Flutter and TSG continue their regular respective businesses.
At the end of December, The Stars Group decided to complete its buyout of BetEasy. TSG agreed to pay $250 million to acquire the remainder of the Australian online betting platform. This included the last 20% interest in BetEasy and a performance payment that was a part of the original 2018 deal. TSG would also pay nearly $57 million of BetEasy’s outstanding loans for minority shareholders.
Shares of both companies – Flutter and TSG – have been mostly on the rise since the 2019 announcement of the acquisition.
Trading on Nasdaq, TSG went from $15.31 the day before the deal notice to $20.92. Since then, it rose to $26.54 and has remained near its 52-week peak in the past two months.
Flutter’s stock has matched TSG’s general trajectory but not by as much of a percentage. It started at $46.75 before October 2, and it steadily rose to near its own 52-week high in January of $63.51. It had dropped a few dollars in the past month until the news of the ACCC approval, at which point it jumped back to $58.85.