Shareholders set for €80m Betfair merger win

Paddy Power shareholders are in line for a fresh €80m windfall, via a special dividend payout, if the leading Irish betting services firm succeeds in its planned merger with UK-based online rival, Betfair.

It was announced yesterday the two companies have reached initial agreement to merge to form a €1.5bn revenue-generating entity, of which Paddy Power would control 52% and Betfair the remaining 48%.

Part of the initial terms announced is the payment of a special dividend of €80m to Paddy Power shareholders immediately prior to deal completion.

Shareholders recently shared a combined €442m pay-back, comprised of the company’s regular annual dividend for 2014, and a €392m special dividend to account for surplus cash.

M&A activity is rife in the betting market — Ladbrokes merging with Gala Coral; 888 and GVC fighting for Bwin —as firms scale-up to meet the growing demand for online and digital services.

Speaking yesterday, Paddy Power CEO, Andy McCue said the company doesn’t have to merge in order to grow, but this opportunity arose, offering “a compelling strategic rationale”. He added that it would “accelerate” Paddy Power’s growth strategy.

While some aspects have been agreed, much more needs to be done before any deal can be completed, and Mr McCue said it would be “aggressive” to suggest it could be finalised by late 2015 or early 2016. Competition approval would be required in both Ireland and the UK, as well as maybe in other countries where both firms operate.

Mr McCue said that both firms have been talking for some time, but would not comment on the exact point when merger talks started.

When asked about the potential for job losses via a merger of technical operations in Ireland, Mr McCue said it is too early to talk about synergies and the proposed merger would be more about operational growth.

Both companies would maintain their indivdual brands, but it is unclear whether each will have individual management teams.

The proposed entity— to be called Paddy Power-Betfair — would likely be floated on both the Dublin and London stock exchanges, but it remains unclear whether it would be headquartered here or in Britain.

Mr McCue is set to become chief operating officer of the new group, with Breon Corcoran — Betfair’s CEO and a former COO of Paddy Power — to head up the overall business.

Gary McGann will chair it, with Betfair’s Alex Gersh earmarked for chief financial officer duties, meaning current Paddy Power CFO, Cormac McCarthy will leave the company should the merger proceed.

A successful deal would also enhance Paddy Power’s US options, where Betfair already has diversified assets.


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