PokerStars Parent The Stars Group Acquired by Flutter Entertainment
In what is shaping up to be the most significant poker news of the year, The Stars Group, parent company of PokerStars, announced on Wednesday that has been acquired by Flutter Entertainment in an all-stock deal. The value of the purchase adds up to more than $6 billion.
Flutter isn’t a no-name
Flutter Entertainment is not the household name that The Stars Group is, but it is a monster company. Flutter is the former Paddy Power Betfair. In 2016, European gambling rivals Paddy Power and Betfair merged. In 2018, the company acquired daily fantasy sports giant FanDuel in a move to gain a substantial foothold in the United States, particularly because the U.S. Supreme Court had just overturned PASPA and opened the door for states to legalize sports betting.
The company changed its name to Flutter, the name of a betting exchange that Betfair bought in 2001, because it had so many brands under its umbrella that naming itself after two of them didn’t make sense anymore.
Flutter also owns the TVG Network, a horse racing television channel and betting network, Adjarabet, and Sportsbet.
In addition to PokerStars, The Stars Group also owns SkyBet.
“This is an exciting and transformational combination that will bring together two strong, complementary businesses to create a global leader in the fast-growing online sports betting and gaming industry,” said Flutter’s Chair Gary McGann in Wednesday’s press release.
$6 billion purchase
The financial details of the deal are a little cloudy, but we will try to break it down for you. Each The Stars Group shareholder will receive .2253 new Flutter shares. There are 287.72 million shares of The Stars Group outstanding, so that means the deal is worth 64,823,316 shares of Flutter.
Flutter’s stock closed at £76.34 on Tuesday (we’ll use this number since shares shot up after the announcement), which would put make those 64+ million new shares worth £4,948,611,943.44. That equates to $6,109,061,443.63.
The new company, which is just being called the “Combined Group” for now, will be controlled by Flutter shareholders. They will own 54.64 percent of the Combined Group, while The Stars Group shareholders will own 45.36 percent. Annual revenue of the combined group would have been £3.8 billion in 2018.
U.S. sports betting competitors better look out
While this deal draws interest in the poker world because of PokerStars, it looks like one of the biggest goals of the companies is to dominate the United States sports betting market. Flutter CEO Peter Jackson said:
The combination represents a great opportunity to deliver a step change in our presence in international markets and ensure we are ideally positioned to take advantage of the exciting opportunity in the US through a media relationship with FOX Sports as well as our development of US sports betting through Flutter’s FanDuel and TSG’s FOX Bet brands. We are committed to these two high quality brands to drive the growth of the Combined Group in the US.
FanDuel is already a major player in sports betting, leading in both Pennsylvania and New Jersey. Both Flutter and The Stars Group have made deals with brick-and-mortar gaming companies – Flutter with Boyd Gaming and The Stars Group with Penn National – to gain access to a multitude of states.
But having two giant (or potentially giant, as the case may be) sports betting companies is overkill, so the Combined Group will consolidate and put FanDuel and Stars’ FOX Bet on a single platform. They may keep both brands, as FanDuel and FOX are both very recognizable to both sports fans and gamblers, but it is entirely possible that only the FanDuel brand is used, as it is already a market leader.
The Combined Group’s competitors in the U.S. are in trouble. DraftKings is probably the company best positioned to compete, since it has the name recognition and customer base. It will be interesting if it comes to that, considering DraftKings and FanDuel has battled it out in the daily fantasy sports space for years.
This move also further signals the declining standing of online poker in the The Stars Group portfolio. In its second quarter financial reporting, the company revealed that online poker had fallen to third in the pecking order, making up 30 percent of The Stars Group’s revenues. Sports betting was number one – thanks in large part to the acquisition of Sky Bet – at 36 percent. Casino gaming was second at 31 percent.
The Stars Group CEO Rafi Ashkenazi hit on this, saying:
This exciting combination will allow us to enhance and accelerate our existing strategy. In recent years, we have transformed TSG from a single product operator in poker, to a diverse global leader with multiple product offerings across poker, gaming and sports betting. The combination with Flutter will further enhance our company’s core strengths, and position us strongly for the future in this rapidly evolving industry. I’m delighted to be joining the Board of the Combined Group and to serve as its COO.