London-listed betting and gaming operators Paddy Power and Betfair have reached an agreement in principle to merge the two companies, with Paddy Power shareholders owning 52 per cent of the enlarged group.
In a joint statement this morning, the companies said that the creation of Paddy Power Betfair plc would create one of the world’s leading online betting and gaming operators by revenue, with “enlarged scale, capability and distinctive and complementary brands.”
“The combination has compelling strategic logic and represents an attractive opportunity for both companies to enhance their position in online betting and gaming and to deliver synergies, customer benefits and shareholder value,” the boards of Paddy Power and Betfair said.
Paddy Power shareholders would own 52 per cent of the issued and to be issued share capital of the enlarged group, which would have a market capitalisation of around £5bn, with Betfair shareholders owning the remaining 48 per cent. Immediately prior to completion, Paddy Power shareholders will also receive a special dividend totalling €80m.
Paddy Power chairman Gary McGann would become chairman of the enlarged group, with Betfair chief executive Breon Corcoran becoming CEO.
The board of directors of the combined group would also comprise other non-executive directors nominated equally from each of Paddy Power and Betfair.
“The proposed merger with Paddy Power is hugely exciting,” said Corcoran alongside publication of Betfair’s first quarter results. “It would create a truly global sports betting group with unmatched products and talent, and significantly enhanced scale.
“The combined business would be one of the world's largest online sports betting operators, with revenues totalling more than £1 billion."
The structure of the possible merger is being finalised with a view to maximising benefits to shareholders and other stakeholders, and it is expected that the combined group will maintain a significant presence in Ireland and in the UK.
With a complementary online business and geographic mix, Paddy Power Betfair would maintain a dual brand strategy in Europe, utilising the “distinctive and complementary” brands of Betfair and Paddy Power. Cost and revenue synergies from efficiencies will reflect the complementary nature of the businesses and benefit from leveraging of the combined group's enlarged scale.
“Discussions remain ongoing regarding the other terms of the possible merger,” said the companies’ boards. “The terms of the possible merger remain conditional on, inter alia, completion of due diligence and the parties reserve the right to waive these conditions and, with the agreement of the other party, to vary the form of consideration and/or make an offer on different terms.
“While there can be no certainty that any transaction will occur, Paddy Power and Betfair expect to provide a further update over the coming weeks.”
Under UK listing rules, Paddy Power has until September 23rd to announce either a firm intention to make an offer for Betfair or announce that it does not intend to make an offer.