London-listed gaming operator Flutter Entertainment has agreed an all-share deal to merge with Toronto-listed The Stars Group.

The all-share combination will see Flutter acquire The Stars Group (TSG) through a plan of arrangement to create a global leader in sports betting and gaming with a diverse portfolio of brands and complementary products with a broad geographic reach.

The recommended transaction gives TSG shareholders 0.2253 new Flutter shares in exchange for each TSG share, with Flutter Entertainment owning approximately 54.6 per cent of the combined entity.

On a proforma basis, the combined entity would have generated revenue of £3.8bn in 2018, making it the largest online betting and gaming operator globally.

The combined business will serve approximately four million active customers in more than 100 international markets and is expected to achieve pre-tax cost synergies of £140m annually.

The business would be led by Flutter Entertainment chief executive Peter Jackson, with current TSG chief executive Rafi Ashkenazi assuming the role of chief operating officer. Jonathan Hill, currently CFO of Flutter, will assume the same role in the combined group, with Flutter’s Gary McGann serving as chair and TSG’s Divyesh Gadhia as deputy chair.

The proposed transaction would also impact the companies' strategic third-party relationships, and the two have taken steps to align their economic interests.

Subject to completion of the business combination, this would see FOX Sports gain the right to acquire an 18.5 per cent equity stake in FanDuel Group at its market value in 2021, with Fastball Holding and Boyd Interactive Gaming gaining the right to a payment equal to 12.5 per cent of the increase in FOX Bet’s market value between completion of the combination and the exercise of Flutter’s option to acquire Fastball’s remaining equity interest in FanDuel Group in July 2023.

All parties have also agreed to discuss options for further alignment prior to completion of the combination.

The proposed transaction is expected to be put to a vote of Flutter and TSG shareholders in the second quarter of 2020, with the transaction expected to complete in the third quarter of 2020.

“This is an exciting and transformational combination that will bring together two strong, complementary businesses to create a global leader in the fast-growing online sports betting and gaming industry,” said Gary McGann, chair of Flutter Entertainment.

“Under Peter Jackson’s leadership we will bring together a management team with the experience required to ensure a successful integration of the businesses, with minimal disruption, during a time of unprecedented change in the sector.

“The combined group will be a strong voice in the promotion of responsible gaming worldwide and will lead industry standards on the protection of customers, whilst building sustainable relationships with them.”

TSG chair Divyesh Gadhia commented: “The Board of TSG and I are delighted to recommend this exciting combination of TSG and Flutter, which we believe will create significant value for TSG’s shareholders.

“Over the past four years our team, led by Rafi, has been working relentlessly and passionately to stabilise, grow and establish TSG as one of the clear leaders in our industry. We seized new opportunities in poker, significantly grew our casino business, acquired one of the UK’s most notable sportsbook brands in Sky Bet, built a significant presence in Australia through BetEasy, and teamed up with FOX Sports to launch FOX Bet to position ourselves to become a leader in the U.S.”

“We have long had respect for Flutter, and believe the combination is a natural next step in the evolution of the business, creating a leader in online betting and gaming with trusted brands, diversified revenues, stand-out technology and the best operational and managerial talent in the industry,” Gadhia added.

Shares in Flutter Entertainment plc. (LSE:FLTR) were trading up 12.86 per cent on the news at 8,616.00 pence per share in London Wednesday morning, while shares in The Stars Group Inc. (TOR:TSGI) closed up 2.12 per cent at CAD$20.25 per share in Toronto Tuesday.

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