Stars Group stock soars after friendly takeover deal with Flutter Entertainment

Stars Group stock soars after friendly takeover deal with Flutter Entertainment
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TORONTO — The Stars Group Inc. has agreed to be acquired by Flutter Entertainment in an all-stock deal that will create one of the world’s largest online betting and gambling companies, the companies announced Wednesday.

The proposal values the Stars Group at about $9 billion on based on Flutter’s share price in London.

Shares of Toronto-based Stars Group closed up $6.24 or 30.81 per cent to $26.49 in Wednesday trading on the Toronto Stock Exchange.

Shareholders of Flutter, which is headquartered in Dublin, Ireland, will own approximately 54.64 per cent of the combined company when the deal closes next year, while TSG shareholders will own about 45.36 per cent.

The combined company’s board and executive team is expected to have representatives from both companies, including the executive chair and the chief executive of Stars Group.

“The board of TSG and I are delighted to recommend this exciting combination of TSG and Flutter, which we believe will create significant value for TSG’s shareholders,” TSG executive chairman Divyesh (Dave) Gadhia said in a statement.

He added that, under the leadership of TSG CEO Rafi Ashkenazi, who will become chief operating officer of Flutter, the company has grown and diversified the business beyond online poker to include gaming and sports betting.

TSG recently teamed up with Fox Sports to launch a betting platform in the United States, a relationship that would continue if the transaction gets the necessary approvals — expected in the second half of 2020.

Flutter CEO Peter Jackson, who will be chief executive of the combined company, said it would continue to work with Fox while also developing Flutter’s FanDuel in the United States.

Fox Sports will have the right to acquire an approximate 18.5 per cent equity interest in FanDuel Group at its market value in 2021. Flutter’s co-owners in the FanDuel Group will receive a payment based on Fox Bet’s market value under a formula.

“The combination will turbocharge our existing four-pillar strategy and provide world-class capabilities across sports betting, gaming, daily fantasy sports and poker, as well as greater geographical and product diversification,” Jackson said.

Under terms of the agreement, shareholders of the Stars Group — formerly known as Amaya Inc. — will receive 0.2253 new Flutter shares for each TSG share.

Flutter shares were up about 11 per cent on the London Stock Exchange after the announcement. The shares were trading at about 85 British pounds each, valuing the offer worth about 19.15 pounds or C$31.12 per TSG share.

TSG shares closed at $20.25 on Tuesday at the Toronto Stock Exchange, giving the Toronto-based company a pre-announcement market value of about $5.8 billion.

In addition to regulatory approvals from the United Kingdom Ireland, Australia, the United States and Canada, the deal will require approval by Flutter and TSG shareholders. Their votes are expected in the second quarter of 2020.

The agreement is expected to close in the second or third quarter of 2020.

This report by The Canadian Press was first published Oct. 2, 2019.

Companies in this story: (TSX:TSGI)

David Paddon, The Canadian Press

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