New group to compete ‘against anyone’

The growing sense of reality surrounding a merger between Paddy Power and Betfair will mean different things to different people.

Some punters might feel there to be a real prospect of a little less competition. Investors are likely to see scope for significant upward share price movement.

Paddy Power shareholders, in particular, now have a bit more visibility on when to expect that €80m special dividend windfall.

For Paddy Power, as a company, the merger represents the chance to scale-up.

Last year, Paddy Power generated revenues of €882m and record profits of €167m.

Ten years ago, it was generating profits of ‘just’ €31m, by comparison. In an interview with The Sunday Business Post in 2002, then outgoing Paddy Power CEO Stewart Kenny was talking about the then newly-launched Paddypower.com website’s hopes of breaking even and the company’s chances of making a dent in the UK market.

Fast forward to 2015 and 75% of Paddy Power’s annual profits come from its online platform, with it also making online strides in Australia, France and Italy.

In a recent note, Davy Stockbrokers analysts, David Jennings and Robert Stokes forecast the new business would have revenues of €2bn, and would see Paddy Power’s current scale disadvantages “dissolve”.

“This group will be able to compete with anyone,” the analysts suggested