Desjardins SecuritiesI also included the link to CNN coverage on gambling. GLTA
https://www.cnn.com/2019/10/02/business/flutter-entertainment-the-stars-group-merger/
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Desjardins Securities analyst Maher Yaghi lowered his rating for The Stars Group Inc. (TSGI-T, TSG-Q) in response to Wednesday's announcement that it has agreed to a US$6-billion takeover by Ireland's Flutter Entertainment PLC. "As the UK gambling industry is affected by significant regulatory headwinds and the U.S. sports betting industry is likely to be the theatre of competition among large, credible companies, we believe gambling firms see an increasingly attractive business case for industry consolidation," said Mr. Yaghi. "This likely prompted the management teams from Flutter and TSGI to propose a merger, which will now have to gain regulatory approval. This could prove challenging, especially in the UK and Australia, as the companies are already strong players in these markets.
"We believe the offer is attractive to TSGI's shareholders if Flutter's stock price remains at the current level. Overall, we believe the combined entity faces less risk due to reduced indebtedness (vs TSGI on a standalone basis) and stronger operations, as the two companies own well-established brands in complementary products in an industry in which scale is a competitive advantage."
Emphasizing the assets for both companies are "very compatible and synergies are significant," Mr. Yaghi moved TSGI to "hold" from "buy" with a $31 target. The average on the Street is currently $30.79.
"We estimate TSGI's current share price implies a probability that the deal will succeed of 85 per cent," he said. "We acknowledge that there are a lot of moving parts to TSGI's value, including Flutter's stock price and the possibility of a higher bidder. However, at this point, given the stock is trading very close to our fundamental valuation of $31, we are downgrading it to Hold from Buy. That said, we believe the stock is meaningfully discounted for regulatory risk but does not consider the potential emergence of other bids."