Flutter may have to offload Paddy Power to secure Stars deal Flutter may face demands from the British competition watchdog to sell off brands, which industry experts suggest could involve an auction of Paddy Power.
The FTSE 100 gambling giant, which earlier this month announced a £10bn (€11bn) merger with Canada’s Stars Group, could be required to make remedies in the UK to win approval for the deal, according to analysts at Canaccord.
The investment bank said the most “logical decision” would be to sell the Paddy Power digital and retail business, given the importance of Stars Group’s Sky Betting and Gaming business in its mission to expand into America. While Flutter will be desperate to hold on to Paddy Power, its combination with Sky Bet and Betfair, making up three of the UK’s top seven online betting brands, could lead to concerns over customer choice, Canaccord said.
Should it go ahead, Flutter’s tie-up with the Stars Group will create the world’s biggest online gambling company, with annual sales of more than £3.8bn. It should cement Flutter’s position in America, where Stars’ Fox Bet brand provides a platform to capitalise on the liberalisation of sports wagers.
However, the combined group will have more than 13m customer accounts, which analysts suggest could include a “high proportion” of customers who have an account with both Sky Bet and Paddy Power. While there would still be a broad range of choice for punters, according to Canaccord, on mobile devices there would be a possibility that Flutter could control all betting apps.
Despite the crossover, Canaccord suggested any sell-off would be an emotionally “difficult decision”, given the enlarged group will be headquartered in Dublin, where Paddy Power is based.
David Power, the co-founder of Paddy Power, is also a 4.4% shareholder in Flutter. Canaccord said that Flutter was likely to retain the Betfair brand, which it had used to drive expansion into international markets.
Flutter declined to comment.
Unveiling the proposed merger, chief executive Peter Jackson refused to be drawn on any possible future remedies which competition bodies might seek. “We are very respectful of the competition authorities,” he said. “We know they need to do their analysis.”