€3.8bn Sky deal creates rival for Paddy Power

€3.8bn Sky deal creates rival for Paddy Power

By Geoff Percival, Eamon Quinn and Sandrine Rastello

The $4.7bn (€3.8bn) takeover of Sky Betting and Gaming by Canada’s Stars Groups is set to significantly increase the competitive pressure on rival players including Paddy Power-Betfair, according to analysts.

The Toronto-based operator of brands such as Full Tilt Poker and PokerStars, which announced the cash-and-stock deal with CVC Capital Partners and Sky on Saturday, is set to win a significant foothold in the UK and beyond.

Sky Betting and Gaming, or SBG, is growing rapidly in online casino games and sports in its home market and recently expanded to Italy and Germany.

Davy said the transaction has resulted in the emergence of four “super-groups” in the online gambling sector; with the Stars-owned Sky Betting joined by Paddy Power-Betfair, Ladbrokes owner GVC and Bet365.

“This deal is unlikely to change the competitive landscape in the UK in the near-term, but elsewhere, in less mature international markets, the Stars Group’s overall product offering will now be even more formidable. The battle between the four heavyweights is only just beginning,” said Davy analysts David Jennings and Joseph Quinn.

Last month, Paddy Power reported a 5% rise in annual online revenues to just over €1bn. However, investors have expressed concern that an expected long-term surge in online revenues may not materialise. Analysts have also said the company’s scale advantage over some of its peers — which hasn’t seen it generate market share gains in many of the countries in which it operates — may be eroded by ongoing industry consolidation.

Shares in the Stars Group surged over 12% in Toronto, and have now gained 76% in the past year, valuing the Canadian online gambling company at €4bn.

London-listed GVC rose 1%, bringing its gains to 36% in the past year. GVC is valued by stockmarkets at €6.37bn.

Darren McKinley, senior analyst at Merrion Capital, said regulatory concerns will continue to weigh on Paddy Power shares and it will continue to rely on Australia where its operations are online as “the key to further upside in the medium term with the US market offering optionality in the longer term”.

Paddy Power shares were slightly higher at €83.55 yesterday, but have dropped almost 13.5% in the past year. It is valued at just over €7bn. Mr McKiney has a ‘hold’ recommendation on the shares.

€3.8bn Sky deal creates rival for Paddy Power

If an upcoming supreme court decision in the US allows sports betting in more states, it would be the “icing on the cake” for the combined Stars/Sky companies, according to Simon Holliday, founder of the research firm H2 Gambling Capital.

“The US sportsbetting Supreme Court case is obviously a big part of the potential upside, with Star’s old database, SBG’s strengths and their track record solely in the UK,” Mr Holliday said.

“Even without the US, SBG is just starting to launch in other regulated markets.”

“Every single new regulated market that opens up, we believe that on a combined basis we will be very strongly positioned to capture a significant market share — the US included.

“But the trigger for this deal was not the US,” said Stars Group chief executive Rafi Ashkenazi.

- Irish Examiner and Bloomberg staff

More in this Section

EasyJet shares fly higher despite profit turbulenceEasyJet shares fly higher despite profit turbulence

Netflix shares weather stormNetflix shares weather storm

Huawei: US ban is still unfairHuawei: US ban is still unfair

Later life mortgages will only be a matter of timeLater life mortgages will only be a matter of time


Lifestyle

Tis the season for sequins and excess, but minimalists can stick to their style guns in the season’s next level neutrals. From low-key glitz that’s perfect for party wear to the wardrobe heroes with trans-seasonal appeal, slide into neutral for maximum style with minimal effort. Carolyn Moore reports.Low-key glitz for minimalists with this season's neutrals

How to plump, hydrate and get rid of spots fast before your Christmas party.The Skin Nerd: Getting your quick fix for the festive party season

Irish photographer Seamus Murphy brought music star PJ Harvey to Afghanistan to film part of their documentary, writes Esther McCarthy.Headlong into the war zone in new documentary

Kya deLongchamps shows us how to champion our environmentWinter greens: How to champion our environment this season

More From The Irish Examiner