Flutter Entertainment to raise £812.6m to drive continued expansion

29th May 2020 7:32 am GMT
Flutter Entertainment

London-listed betting and gaming operator Flutter Entertainment is seeking to raise £812.6m from a private placement of more than 8m new shares with institutional investors including US media giant Fox Corporation.

A total of 8,045,995 new ordinary shares in the company have been placed by Goldman Sachs International and J&E Davy at a price of 10,100 pence per share, equivalent to gross proceeds of £812.6m.

The placing shares are equivalent to approximately 5.5 per cent of Flutter’s issued share capital, immediately prior to the placing, with the placing price representing a discount of 4.7 per cent to Thursday’s closing price of 10,600.00p

As part of the placing, Fox Corporation has committed to increase its investment in Flutter.

“FOX is bullish about the opportunities in the digital sports wagering market,” said Fox Corporation executive chairman and CEO Lachlan Murdoch. “FOX Bet has shown strong growth since launching last fall, and we look forward to continuing that success with our partner, Flutter.

“FOX's investment in Flutter underscores our confidence in Flutter's business and its management's ability to continue to drive leadership in the US market.”

In giving its reasons for the placing, Flutter said that the current operating environment was likely to result in longer-term changes to the sector landscape, which will lead to further opportunities, particularly in the US and in online poker.

“Flutter believes that one potential consequence of the COVID pandemic is that the pace of regulation in the US could accelerate, as an increasing number of US states look for new ways to raise additional sources of tax income,” said the operator, which recently completed its merger with The Stars Group. “Flutter is determined to give its US business the best possible platform for future success and to replicate the leadership position it has achieved in the states that have regulated to date.”

Flutter will look to invest to secure additional market access deals in individual US states, while its investment in customer acquisition will also likely increase should the pace of regulation accelerate.

The company will also increase investment to enhance its competitive positioning after experiencing strong growth in its online customer base in recent months, due to the accelerated migration of customers from retail to online as retail betting and gaming venues have remained shut.

There has also been a resurgence of customer engagement with the operator’s online poker products, with the placing providing Flutter with the financial flexibility to invest further in the retention of these newly acquired and reactivated customers across its brands.

“Moreover, it will better position the group to capitalise on any opportunity to acquire additional customers while less well-diversified competitors face on-going challenges,” said Flutter.

The placing will also facilitate a faster de-leveraging of Flutter’s balance sheet, leading to immediate interest cost savings and reduced annual cash outflows, as well as reducing the company’s overall level of debt and provide the operator with a more robust balance sheet in a more uncertain environment.

Overall, Flutter’s board said that it would be prudent to accelerate its de-leveraging strategy towards the group's target leverage ratio of 1.0 - 2.0 times Net Debt to EBITDA.

Based on a current consensus EBITDA estimate of £950m for 2020, the 5.5 per cent placing would reduce year-end leverage by 0.9x1.

Shares in Flutter Entertainment plc (LSE:FLTR) closed up 1.92 per cent at 10,600.00p per share in London Thursday prior to the placing announcement.

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