Betfair, Paddy Power Shareholders Approve Merger
Shareholders from both Betfair and Paddy Power overwhelmingly approved the merger of the two companies on Monday, paving the way for the finalization of the deal in the coming months. The two former competitors agreed to combined forces in August 2015; the new company, which will be called Paddy Power Betfair plc, would have approximately €1.5 billion ($1.7 billion) in revenues.
The votes came just days after the UK Competition and Markets Authority gave its ok to the merger. The UK CMA began the review in November and allowed commentary from both the industry and general public until the recent approval. Had the deal not been given approval right now, it may have had to be subjected to a second phase of an investigation which could have taken another three months.
Paddy Power said in a statement that the two companies expect the merger to be completed in the first quarter of 2016.
The deal still needs to clear the hurdle of the Ireland Competition and Consumer Protection Commission (CCPC). Paddy Power CEO told Independent.ie, “We’re hopeful of getting a positive outcome. Our expectation is that the deal will close in the first quarter of next year. We have good on-going dialogue with the CCPC, but obviously they have to complete their own investigation.”
The new company will be headquartered in Dublin. Paddy Power shareholders will own 52 percent of the business, while Betfair shareholders will hold the remaining 48 percent. Paddy Power shareholders will get the added benefit of a special €80 million dividend.
When the merger was announced, Betfair CEO Breon Corcoran told The Financial Times, “These are two businesses that are performing at a very high calibre and we will have a market-leading position in the UK, Europe, Ireland and Australia.
“We are paying a slight premium but I regard this as a merger of equals. We have known each other a long time. I used to wear a green jacket. We have been speaking intensely over the summer and warmly for a time before that.”
Interestingly, leadership of the two companies didn’t spout the usual corporate-speak about the merger. CFO of Paddy Power Cormac McCarthy admitted both companies brought their own strengths to the table. “Betfair is the leading exchange business in sports betting and that technology is something Paddy Power does not have,” he said. “We have a retail and mass market business and we have an Australian business that they do not have. If you look at the strategic rationale, synergies are not the first thing.”
Here’s what the new executive structure of the company will look like:
Gary McGann, Chairman of Paddy Power – Chairman of the Board of the new company
Breon Corcoran, CEO of Betfair – CEO of the new company
Andy McCue, CEO of Paddy Power – COO and an Executive Director of the new company
Alex Gersh, CFO of Betfair – CFO and an Executive Director of the new company
While the two companies will now be together under one umbrella, they will continue to operate as separate brands. Paddy Power has 336 brick-and-mortar betting shops in the UK and 252 in Ireland, as well as an online presence. Betfair is dominant online as the world’s largest betting exchange. It is expected that about 80 percent of the company’s revenues will come from online gaming.
When the merger was announced, the companies said that they weren’t concerning themselves with cutting jobs to make the deal look good for investors, but it does appear that it is a possibility. Andy McCue told Independent.ie that jobs could be eliminated, but they don’t know in what areas yet, as the “full integration planning” has yet to begin.
“Our focus at the moment is on running the businesses as hard as we can versus the competition and we’ll continue to do that right up to the date of completion.”
While Paddy Power Betfair will be a formidable company, it won’t stack up to the other merged power in the UK in terms of brick-and-mortar reach. A month before Paddy Power and Betfair announced their combination, Ladbrokes and Gala Coral announced a similar merger. The new Ladbrokes Coral will have over 4,000 betting stores if the Competition and Mergers Authority does not require it to sell any. Competitor William Hill has 2,300 shops in the UK.
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