- Final terms of transaction announced by betting companies
- New company may become part of U.K.'s FTSE 100 Index
Paddy Power Plc settled the terms of its combination with Betfair Group Plc, agreeing to acquire its competitor for 2.87 billion pounds ($3.2 billion) in a deal that creates the biggest publicly listed online-gaming company.
Two weeks after announcing an agreement to merge, the companies provided final details on Tuesday, including an estimate for annual pretax cost savings of about 50 million pounds. The enlarged company looks set to become part of the U.K. benchmark FTSE 100 Index, according to Peel Hunt analyst Nick Batram.
“This is a deal about two strong players combining to create a market-leading online business with significant opportunity,” Batram wrote in a note. “The potential inclusion in the FTSE 100 will open up the enlarged group to an even greater audience of investors.”
Combining Paddy Power and Betfair brings together two of the industry’s fastest-growing businesses at a time when increased regulation and taxation are driving companies to seek efficiencies through mergers. GVC Holdings Plc last week agreed to buy Bwin.party Digital Entertainment Plc for about 1.12 billion pounds, just the latest of a series of deals across the industry.
Paddy Power’s amalgamation with Betfair has had strong support from both sets of shareholders and is unlikely to encounter any obstacles, according to David Holohan, an analyst in Dublin with Merrion Capital.
Under the terms outlined Tuesday, Betfair investors will get 0.4254 new shares in the merged company, valuing the shares at 3,085 pence each, based on where Paddy Power ended trading yesterday. That’s a 19 percent premium to Betfair’s closing level on Aug. 25, the day before the companies announced their plan to combine.
Paddy Power shareholders will receive a special dividend of 80 million euros ($89.7 million) and own 52 percent of the new entity, Paddy Power Betfair Plc. The board of the new company will target a payout ratio of approximately 50 percent of profit after tax when setting its initial dividend.
Paddy Power shares rose 0.5 percent to 99.93 euros at 8:21 a.m. in Dublin, while Betfair gained 0.9 percent to 3,165 pence in London.
The companies announced the planned transaction on Aug. 26, while saying they were still working on the structure. Even before they announced their tie-up, gambling companies had announced $9.1 billion of deals this year, the most in a decade, according to data compiled by Bloomberg.
Betfair Chief Executive Officer Breon Corcoran, a former Paddy Power executive, will lead the enlarged business, which will have annual revenue of more than 1.5 billion euros, the companies said previously.
Paddy Power Betfair will be based in Dublin, and will have premium listing on the London Stock Exchange. It will a secondary listing on the Irish Stock Exchange as an overseas company.
Morgan Stanley and IBI Corporate Finance are advising Paddy Power, while Goldman Sachs Group Inc. is providing financial advice to Betfair.