Combined Company Would Create Online Gambling GiantPublished on August 26th, 2015 9:15 pm EST
The online gambling industry looks to continue its trend of consolidation after Betfair and Paddy Power announced on Wednesday morning that they are looking to merge in what would be a 5 billion pound deal. The deal, if it goes through, would one of the largest online gaming firms in the United Kingdom with revenues of over 1.1 billion pounds.
Under the proposed terms of the deal, Paddy Power shareholders would control 52% of the combined company, while Betfair's shareholders would own the remaining 48%. In addition, Paddy Power's shareholders would receive a special dividend of 80 million Euros. The two brands are going to continue to operate "side by side", with Betfair Chief Executive Breon Corcoran set to lead the new group.
The market cheered the news on Wednesday, as shares of Paddy Power (PAP on the London Stock Exchange) closed up over 18%, while shares of Betfair closed up over 16%.
William Hill, on the other hand, finished the day down nearly 3% as investors worried about the impact of the Paddy/Betfair merger on the company's operations.
The online gambling sector has seen some frantic merger activity over the past year or so. Ladbrokes and Gala Coral recently combined in an all-share deal, while 888 Holdings and GVC Holdings continue to wage war over Bwin.Party.
This wave of consolidation has been sparked by higher tax bills and increased regulation. Breon Corcoran was quoted as saying that the online gaming sector is "all about scale", and that companies must get bigger in order to thrive.
According to reports, Paddy Power's nearly 600 betting shops will still continue to operate if the merger goes through.
Source: Reuters.com - Gambling Firms Betfair and Paddy Power Set For 5 Billion Pound Tie Up
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