Igaming Focus: Flutter and Stars Group tie the knot in uncertain times By Hannah Gannagé-Stewart, CDC Gaming Reports April 29, 2020 at 2:00 pm This commentary is a part of the April 2020 issue of Igaming Focus. Amid the unrelenting COVID-19 news, a mega-merger has been brewing between The Stars Group (TSG) and Flutter Entertainment. The two industry behemoths, probably as of late May, will become the world’s biggest business-to-consumer (B2C) online gambling business. The acquisition of TSG by Flutter was first mooted in October 2019 and, due to its scale, was referred to the UK’s Competition and Markets Authority (CMA) for approval, which it received in March. Now that both sets of shareholders have also voted in favour of the move, Flutter, the parent company of Paddy Power Betfair and FanDuel, is all set to proceed with its £3.8bn ($4.7bn) acquisition of TSG, which operates Sky Bet and Full Tilt Poker. The deal may have come at just the right time, shoring up both businesses as the COVID-19 pandemic looks set to strip billions off this year’s global industry revenues. H2 Gambling Capital predicts that 2020 will see global gambling gross win reach no more than $384.4bn, which is $5.3bn behind the 2012 figure. The combined company will benefit from a better-balanced mix of sports and gaming verticals, as well as stronger liquidity and a greater global reach. On the flipside, however, combining two such vast businesses at a time of global uncertainty could also throw up challenges. Merger integration can be a poisoned chalice at the best of times. On the other hand, with the majority of shareholders backing the acquisition on both sides, a consensus on the direction of travel is likely to ease progress. Neither party is a stranger to consolidation. Flutter Entertainment, rebranded as such from Paddy Power Betfair Plc in March 2019, has been on an acquisition trail for half a decade. Irish Paddy Power and British rival Betfair inked their merger deal in September 2015, becoming Paddy Power Betfair in February 2016. It was one of the biggest mergers to take place in the industry up until that time, creating an entity with combined revenues of more than £1.1 billion ($1.6 billion). Paddy Power Betfair, predominantly a sports betting operator, went on to acquire daily fantasy sports (DFS) operator Draft in May 2017 and then FanDuel, in a somewhat surprise announcement, the following May just as the U.S. sports betting market started to open up. In February 2019, the company acquired a 51% controlling stake in Adjarabet, a Eurasian operator based in Georgia, before announcing its TSG ambitions later in the year. TSG, likewise, is the product of long-term consolidation. In June 2014, legacy company Amaya became the world’s largest publicly listed gambling business after acquiring PokerStars and Full Tilt Poker. It rebranded as The Stars Group in August 2017. In April 2018, as Flutter was building its DFS empire, TSG acquired UK-focused Sky Betting & Gaming and in December 2019 completed an acquisition of Australian online sports betting business BetEasy, having already acquired a majority stake in the legacy brand CrownBet from casino operator Crown Resorts in 2018. The trail of consolidation that brings Flutter and TSG to this point can only signal what is to come in other parts of the industry. Rival businesses, such as GVC Holdings, have also demonstrated how aggressive acquisition strategies can fast-track them to the top of the industry as measured by revenue. Isle of Man-headquartered GVC was founded (as Gaming VC Holdings) in 2004, becoming GVC Holdings in 2010. Since then, notably, it has acquired all SportingBet operations outside of Spain and Australia (2012), Bwin Party (2016) and Ladbrokes Coral (2018). Like Flutter, GVC also moved early to shore up its U.S. presence after PASPA was repealed, but rather than acquiring an established U.S. business, it brokered a $200 million deal with MGM Resorts. The emergence of these online-gambling powerhouses signals the maturing of a market that has long been in need of a dose of discipline. As the stakes get higher for the shareholders of these massive firms, compliance will become less of a necessary evil and more of a guiding influence in the way that they are run. A greater level of competence around player protection is likely to emerge as they structure businesses that can operate effectively across multiple jurisdictions. There’s already a sense of ‘us vs them’ when compared to businesses more closely attached to their brick-and-mortar roots. Meanwhile, Flutter/TSG need to weather the COVID-19 storm; the former recently estimated it could lose up to £110m if restrictions continue until August. With sports betting making up more than 75% of Flutter’s revenue and 38% of TSG’s, however you look at it, it promises to be an uncomfortable start to the new relationship.