It represents the latest move in consolidation of the sector, following on from news of Ladbrokes’s (LON:LAD) planned merger with Gala Coral.
The deal will create a gambling giant with annual revenues of more than £1.1 billion ($1.7 billion).
Upon completion the merger would lead to the creation of a new company named Paddy Power Betfair.
That is unorthodox for a deal of this size, but it did not stop shares in Paddy Power rising by 18% and in Betfair by 20%. This morning the firm took to Twitter to parody its unintended prescience. “Despite the gambling industry contributing over £2bn annually to UK GDP, it has never been viewed very favourably by Parliament and regulatory bodies have been keen to clamp down, partly because many big bookmakers have located themselves offshore to reduce their tax burden”.
Both Paddy Power and Betfair have cautioned there is no guarantee the deal will go through, though they have agreed in principle to rebrand the merged businesses as Paddy Power Betfair, with Paddy Power shareholders owning 52 per cent and Betfair 48 per cent.
Its size would also help it compete in new and existing betting markets, which are being increasingly dominated by smartphone and tablet users. Paddy Power shareholders will also benefit from a special €80 million dividend.
Betfair Group Plc surged 21.8% to 3,170 pence after the online sports betting and gaming company reported revenues in the first-quarter ending in July jumped 15% from a year ago to £135.4 million from £117.3 million.
With both firms looking strong, if Mr Corcoran can successfully integrate the two, the resulting company will be a formidable force in gambling, particulary online betting.
Sportingbet owner GVC said it was continuing to work closely with FoxyBingo owner bwin.party “with a view to finalising” aspects of an offer as it seeks to gatecrash bwin’s takeover by 888 Holdings.
Both companies would maintain their indivdual brands, but it is unclear whether each will have individual management teams.
It has grown rapidly to now have more than 350 betting shops in Ireland and the UK, and is the third-largest online bookmaker and sixth largest online gaming business in Britain and Ireland.
Betfair’s CEO, Breon Corcoran, and CFO, Alex Gersh, will retain their strategic leadership positions in the combined group with Paddy Power’s chairman, Gary McGann, overseeing the board.
Speaking to the Irish Independent yesterday, Andy McCue said that the merger accelerates Paddy Power’s strategy.