Betfair and Paddy Power to Merge
On the 8 September 2015, Paddy Power and Betfair agreed terms for their merger, which will create a new entity named Paddy Power Betfair Plc. (Paddy Power Betfair has been nicknamed "Betty Power" in the industry). The companies announced on the 26 August 2015 that a conditional deal had been reached. The merger process is underway and has been investigated by the Irish Competition and Consumer Protection Commission (CCPC) and the UK Competition and Markets Authority (CMA), whose responsibility it is to promote competition for the benefit of consumers.
This final regulatory hurdle was successfully negotiated in January 2016, with the CCPC concluding that it had "formed the view that the proposed transaction will not substantially lessen competition in any market for goods or services in the state".
Paddy Power Betfair Plc began trading on the London Stock Exchange on Tuesday February 2nd 2016, with an opening share price of £104.02.
Background
The proposed merger will see Paddy Power shareholders holding a total of 52% of the stake in the combined business. Betfair investors will hold the remaining 48%.
The merger will result in the creation of one of the world’s biggest online gambling groups. The group will operate in more than 100 countries, with 7,000 staff and approximately £1.2bn in sales. The merger is expected to complete in the first quarter of 2016.
Around 80% of Paddy Power Betfair’s annual revenues are expected to come from online business.
Betfair’s chief executive Breon Corcoran will be the head of the merged company. (Corcoran has been credited as the catalyst for the deal talks.) He was previously chief operating officer at Paddy Power until joining Betfair three years ago. Paddy Power’s chairman Gary McGann is retaining his position.
Paddy Power Betfair will be headquartered in Dublin. The combined group will still maintain a "significant presence" in the UK and Ireland, however. The company will be listed on both the London and Irish stock exchanges.
The two companies are looking at how their brands will work together whilst maintaining their distinct identities, integrating their technology and creating a shared operations team.
The merger marks a further departure from Betfair’s initial stance of their betting exchange marking the death of the bookmaker. Early Betfair marketing featured a bookmaker in a coffin. (The other major stage in this process was the launch the Betfair Sportsbook, a traditional fixed odds platform where Betfair is the bookie, in May 2012.)
The deal is the latest of many mergers and acquisitions in the betting industry. Companies are attempting to survive and lower costs in an environment of increasingly strict regulation and new tax laws, which has put the industry under unprecedented pressure. (For example, in Britain, a 15% online gambling tax was introduced last year.) Earlier in September 2015, Sportingbet owner GVC announced it is buying Bwin. This came after Gala Coral and Ladbrokes merged in July 2015 to create a £2.3bn gambling giant, threatening William Hill’s position as the UK’s number 1 bookmaker. FoxyBingo owner bwin.party have accepted a £1.1bn cash-and-shares offer from GVC.
This consolidation wave is driven by other trends, namely the:
- Shift from racing to sports betting.
- Increasing popularity of mobile wagering, and online gambling in general, at the expense of high-street bookies.
There has been huge demand for Paddy Power Betfair stock from institutional investors ahead of the creation of the merged company. This demand has enabled Betfair co-founder, Edward Wray, to sell more than a third of his 9.5% stake in Betfair. The sale of three million shares by Wray is a larger slice of the company than the market was expecting.
