Casinos & Hotels

Will TSG and Flutter Get Lucky Creating the World's Biggest Online Betting Site

The Stars Group Inc. (NASDAQ: TSG) shares exploded on Wednesday after the firm announced that it will be acquired by Flutter Entertainment in an all-share combination. This deal will form the world’s largest online betting company.

It will bring together two complementary businesses to create a global leader in sports betting and gaming. The combined group will have a diverse portfolio of leading brands and complementary best-in-class products with a broad geographic reach. Flutter and TSG would each bring to the combined group a proven track record in using product and brand leadership to create low-cost customer acquisition channels, while optimizing value through product cross-sell.

It will benefit from an enhanced global platform and improved local market reach. On a pro forma basis, the combined group’s annual revenue would have been €3.8 billion in 2018, making it the largest online betting and gaming operator globally.

Under the terms of the agreement, TSG shareholders will receive 0.2253 new Flutter shares in exchange for each TSG share. At this point, Flutter shareholders would own roughly 54.64% and TSG shareholders would own 45.36% of the combined company.

The new company is also expected to be at least 50% accretive to Flutter underlying EPS in the first full financial year following completion. Also it will deliver substantial value creation for shareholders from pretax cost synergies of €140 million annually, along with potential revenue cross-sell in international markets and lower finance costs.

In terms of the management, Peter Jackson, currently CEO of Flutter, will assume the role of chief executive of the combined group. Jonathan Hill, now chief financial officer of Flutter, will assume that role, and Rafi Ashkenazi, currently CEO of TSG, will become chief operating officer.

Shares of Stars Group traded up about 30% Wednesday to $19.95, in a 52-week range of $12.59 to $24.62. The consensus price target is $27.78.