Shares in Paddy Power owner Flutter surge on €10bn mega deal

Shares in Paddy Power owner Flutter Entertainment surged as much as 18% on it announcing an estimated €10bn mega deal which is set to make it the largest online betting and gaming business in the world.

Flutter has agreed to buy Canadian online gaming business Stars Group in an all-share deal, which - dependent on shareholder agreement and regulatory approval in Ireland, the UK, Australia, the US and Canada - is expected to finally complete by the third quarter of next year.

If that happens, Flutter - mainly known in this part of the world for Paddy Power and its Betfair betting exchange business - will see its international reach strengthen and its US business grow; not least through a partnership with Fox Sports. It will also take ownership of a number of well-known brands such as Sky Bet, Full Tilt Poker and PokerStar, which is the largest real money online poker site in the world.

The deal is also expected to add at least 50% to the group's earnings per share in the first year of the merger. Cost savings of £140m have been identified.

The Irish group's shareholders will ultimately control 54.64% of the enlarged business, which will have an estimated market value of £9.64bn (€10.8bn). Including debt, the deal is estimated to be worth - in enterprise value terms - around £8.8bn (€9.9bn).

Flutter said that the combined business would have generated £3.8bn in revenues last year, which would have made it the global leader in online betting and gaming services.

The overall group will keep the Flutter name, remain headquartered in Dublin and will have a primary share listing in London and a secondary listing in Dublin. Peter Jackson will remain Flutter's chief executive, with Gary McGann remaining as chairman and current Flutter chief financial officer Jonathan Hill staying in his role. Stars CEO Rafi Ashkenazi will become the enlarged group's chief operating officer.

Mr McGann called the merger "transformational" and said the combined group will be "a strong voice" in the promotion of responsible gaming and will lead industry standards on customer protection.

Mr Jackson said the deal will deliver "substantial" value for shareholders and will "turbocharge" Flutter's four-pillar growth strategy; which surrounds growth in its core Irish and UK businesses, US growth, international expansion and entry into new online markets.

Flutter's share value has grown by nearly 30% in the past 12 months. While much of the post-announcement gains were pared, the stock still closed ahead by over 7%.