Paddy Power unveils merger talks with rival Betfair

In a statement issued to the stock exchange they said: ” The possible merger would create one of the world’s largest public online betting and gaming companies by revenue with enlarged scale, capability and distinctive and complementary brands.

“The combined business would be one of the world’s largest online sports betting operators, with revenues totalling more than £1 billion”.

Paddy Power is on top – shareholders will get 52% of shares in the new combined group, as well as a special €80 million (£58.5 million, $US91.8 million) dividend post-completion, and CEO Gery McGann will run the new group.

“The combination has compelling strategic logic and represents an attractive opportunity for both companies to enhance their position in online betting and gaming and to deliver synergies, customer benefits and shareholder value”, the boards of Paddy Power and Betfair said.

The tie up would be the latest in a flurry of M&A deals in a sector where companies are responding to higher tax bills in Britain and tighter regulation by looking to bulk up and better compete in the fast growing online market.

Paddy Power said its operating profit grew 33% to EUR80.0 million in the first half, despite taking a EUR32.0 million hit from new taxes and product fees, and the group now expects its operating profit to come in ahead of market expectations for the full year.

Net revenue rose 25% with strong double digit growth across all online and retail divisions. Paddy’s chief executive Andy McCue would become chief operating officer.

Gary McCann, the chairman of Paddy Power, would become the chairman of the combined group, with Betfair Chief Executive Breon Corcoran to become chief executive. GVC is in talks to make an offer to acquire Bwin.party Digital Entertainment Plc, which has already agreed to sell itself to 888 Holdings Plc. The companies are still discussing the other terms of the merger, they said.