* Combination to create market-leading gambling company
* Targets U.S. market as more states allow sports betting
* Industry being reshaped by shift to online gambling
(Adds share price movement, context)
By Graham Fahy
DUBLIN, Oct 2 (Reuters) - The owners of Paddy Power Betfair
and Poker Stars have agreed to merge in an all-share deal that
will create the world's largest online betting and gambling
company by revenue 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.
Following the merger, shareholders of Flutter would own
approximately 54.64% of the new company, with TSG shareholders
owning about 45.36%.
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.
Shares in Flutter jumped 15 percent in early trading, while
gambling rivals GVC and William Hill were also
lifted by the prospect of further consolidation.
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.
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.
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.
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 Muralikumar Anantharaman
and Mark Potter)
