Flutter may have to sell Paddy Power

If the £10 billion Flutter Entertainment and The Stars Group merger is to secure regulatory approval, Flutter may be forced to sell its brands, including flagship Paddy Power.

Since the merger was propositioned on 2 October, Flutter CEO Peter Jackson and corporate governance have emphasised confidence in clearing all regulatory hurdles to deliver a £10 billion online gambling powerhouse.

However, analysts at Canadian investment bank Canaccord Genuity have said that, in order to secure approval from the UK’s Competition and Markets Authority (CMA), for the merger set to create the world’s biggest gambling group, Flutter may be forced to sell both retail and online brands.

Canaccord Genuity analysts say that the most “logical decision” would be for Flutter to sell Paddy Power’s online and retail business, given the importance of The Stars Group’s presence in lucrative US sports betting market through its BetStars and Sky Bet brands.

Also, the combined Flutter/The Stars Group operation will own three of the UK’s seven largest sports betting and online gambling brands, which is likely to result in competition watchdogs seeking remedies to combat enormous market share of the newly created business. However, the decision to sell Paddy Power can prove to be “emotionally difficult” as the company is based in Dublin – the city where the new group plans to have its headquarters.

Flutter has also put a lot of effort into revitalising Paddy Power. The company has spent significant money and resources upgrading the bookmaker’s operating systems, all-round product proposition and revamping its loyalty programme wholesale. Also, Paddy Power’s ambitions have been supported by several high coverage UK advertising campaigns.

Assuming the merger goes ahead, the new group’s online betting revenue is likely to be 50 per cent higher than British betting superpower bet365, and about 100 per cent higher than GVC Holdings, owner of Ladbrokes, Coral and other British betting brands.

The merger is also likely to prompt regulatory scrutiny in Australia. Flutter’s Sportsbet has an 18.1 per cent share of Australia’s sports betting market and is the second-largest operator in the country, behind only Tabcorp, while The Stars Group’s BetEasy has 8.1 per cent share.

At present, Flutter governance maintains its schedule of completing the transaction by the second half of 2020.

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