* Combination to create market-leading gambling company
* Targets U.S. market as more states allow sports betting
* Strengthens ties with Murdochs' Fox in the U.S.
* Industry being reshaped by shift to online gambling
(Recasts lead, adds analyst comment)
By Graham Fahy
DUBLIN, Oct 2 (Reuters) - The owner of Paddy Power Betfair
has agreed to buy the company behind Poker Stars in a $6 billion
share deal to create the world's largest online betting and
gambling company by revenue, seeking to take advantage of the
opening up of U.S. markets.
Flutter Entertainment , formerly known as
Paddy Power Betfair, is to combine with Nasdaq- and
Toronto-listed Stars Group Inc (TSG), owner of Poker
Stars, the companies said on Wednesday.
U.S.-listed TSG shares soared 50% in premarket trading after
the deal was announced. Shares in Flutter jumped 20 percent,
while gambling rivals GVC and William Hill were
also lifted by the prospect of further consolidation.
The merger is the latest in a series of deals as the
industry responds to the growing number of gamblers using
online and mobile devices and the opportunity created by the
relaxation of rules on sports betting in the United States.
Combined annual revenues would have totalled 3.8 billion
pounds ($4.7 billion) in 2018, making Flutter-TSG the largest
online betting and gaming operator globally, the companies said.
Flutter CEO Peter Jackson, who will retain his role in the
combined group, said the deal would "turbocharge" Flutter's
existing strategy and "provide world-class capabilities across
sports betting, gaming, daily fantasy sports and poker, as well
as greater geographical and product diversification."
The merged group will have its headquarters in Dublin and
its main listing in London.
Shareholders in Flutter would own approximately 54.64% of
the new company, with TSG shareholders owning the remainder.
FOX BACKING
The merged group will be boosted by a partnership in the
United States with FOX Sports, which will have the right to
acquire an 18.5% stake in Flutter's FanDuel U.S. business from
2021.
"We're excited to be able to expand our partnership into
FanDuel, which together with FOX Bet, will be a leader in sports
wagering in the U.S.," said Fox Corp CEO Lachlan Murdoch.
The Murdochs' Fox Corp launched the FOX Bet sports
betting platform last month in New Jersey in partnership with
The Stars Group.
Dublin-based Flutter merged its U.S. business with fantasy
sports company FanDuel last year in a deal it said would create
the industry's largest online business in the United States.
TSG had bolstered its British operations last year when it
bought Sky Betting & Gaming in a $4.7 billion deal.
Flutter has sharpened its focus on North America as the
potentially huge U.S. market opens up and it faces higher taxes
and increased regulations in its main British, Irish and
Australian markets.
The combined group will serve customers in more than 100
countries. Around half of its current income is generated in
Britain and Ireland, with 15 percent in Australia, 5 percent in
the United States and 31% from the rest of the world.
Betting exchange Betfair and Paddy Power, which runs high
street betting shops as well as an online business, merged in
2016, although the integration took longer than anticipated and
a toll on product investment for a time.
The merger is expected to deliver pretax cost synergies of
140 million pounds per year, along with opportunities to
cross-sell products to one another's customers in international
markets and lower finance costs, the companies said.
The deal is also expected to boost Flutter's underlying
earnings per share by at least 50 percent in the first full
financial year following completion.
Under the terms of the merger, TSG shareholders will be
entitled to 0.2253 new Flutter shares for each TSG share.
($1 = 0.8157 pounds)
(Reporting by Graham Fahy; Editing by Keith Weir and Mark
Potter)
