Flutter and Stars Group merger facing UK competition authorities probe

Competition authorities plan to review the £10 billion merger between the two gambling groups Flutter Entertainment, owner of Paddy Power and Betfair; and The Stars Group, which owns Sky Betting and Gaming and PokerStars, among other brands.

The UK’s Competition and Markets Authority (CMA) said on Wednesday it would investigate whether the deal would result in a “substantial lessening of competition” in the UK gambling market, the Financial Times reports. The CMA is now inviting comments on the deal, and has set a deadline of 18 February.

An investigation into the deal between Flutter and Stars, which was announced in October, had been expected by some, given recent moves by the CMA to focus more on competition online. Analysts at Davy said the CMA review was expected and the timing was consistent with the timetable previously set by Flutter, suggesting the deal was on schedule to complete by the third quarter this year. Julian Easthope, an analyst at Royal Bank of Canada, said that, despite the competition review, he did not expect “significant remedies” to have to be made.

Brands controlled by Flutter and Stars make up around 40 percent of the UK’s online sports betting market. Analysts at Redburn estimated that the two companies control around 26 percent of the overall online gambling market in the UK — close to the 25 percent threshold over which the CMA takes an interest. The deal is expected to close in the second or third quarter of this year depending on the CMA’s findings and, if successful, will create the largest online betting operator in the world by revenue. 

Shareholders of Flutter will own close to 55% of the new company. Shareholders in Stars Group will own the rest. The combined group will be headquartered in Dublin and will have its primary listing on the London Stock Exchange.

In 2016, the CMA ordered Ladbrokes and Gala Coral to sell up to 400 shops in order to gain clearance for their £2.2bn merger. The pair would have owned 4,000 retail betting shops in the UK. Since then the fast growth of the online betting market has resulted in further consolidation across the industry with GVC buying the merged Ladbrokes Coral and Paddy Power merging with Betfair, the betting exchange.

Furthermore, there is potential that the Flutter and Stars Group tie-up could be reviewed by Australian authorities where both brands have a strong presence.