Paddy Power in Sportsbet buyout

PADDY POWER — the leading Irish bookmaker — is set to take full control of Australian online betting company Sportsbet by exercising its option to buy the outstanding minority share of the company it didn’t already own for €101 million.

The Irish company initially bought a controlling 51% stake in the Darwin-based Sportsbet, for just over €27m, in the summer of 2009; before upping that to just under 61% in February of this year.

Yesterday, the company announced it will exercise its option to sweep up the remaining 39%, for €101m, giving it full ownership of Australia’s largest corporate bookmaker.

The consideration will comprise €83.8m in cash (from Paddy Power’s existing cash reserves) and €14m worth of new Paddy Power shares and the assumption of a €3m obligation to certain Sportsbet employees.

A special dividend, of €6.5m, will also be paid to all Sportsbet employees prior to the deal being completed.

“When we acquired 51% of Sportsbet, in 2009, we were confident that we were investing in a business with strong potential in a growing market,” said Paddy Power chief executive Patrick Kennedy yesterday.

“That confidence has been borne out and some; it’s a cracking business. The team has made great strides in marrying the best of both Sportsbet and Paddy Power.

“This is a good deal to acquire the remaining shares early, which will allow us to drive development and investment and secure full participation in the upside of the business,” he added.

As a Class-1 transaction, the acquisition — which is expected to be earnings enhancing in 2011 — needs shareholder approval.

Paddy Power will hold and extraordinary general meeting, to put it to a shareholder vote, during the first quarter of 2011.

Final approval is also necessary from the Australian Foreign Investment Review Board and the Northern Territory Racing Commission.

Sportsbet generated a pre-tax profit of Aus$20.3m (nearly €13m) in its last financial year, up to the end of June.

Paddy Power is expecting the Australian company to achieve EBITDA (earnings before interest, tax, depreciation and amortisation) of a minimum of Aus$23m (nearly €16m) for the six months to the end of December.

Paddy Power is also keeping in place initial guidance of underlying diluted earnings per share growth of 35%-40% for this year.