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Old 10-02-2019, 04:03 AM   #1
ArtyMcFly
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Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

This sounds like a (very) big deal:

Financial Times: https://www.ft.com/content/3d43e34c-...3-db5a370481bc

Gaming Intelligence: https://www.gamingintelligence.com/m...group-to-merge
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Old 10-02-2019, 04:17 AM   #2
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

Massive deal, both (flutter/tsg) have an interesting portfolio ... idk much about flutter, so i'm wondering how this will affect the debt situation re sky and the cost saving attempts at the poker vertical
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Old 10-02-2019, 04:18 AM   #3
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

They most likely cant do worse than Amaya
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Old 10-02-2019, 04:19 AM   #4
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

It's huge news in the online gaming world.

Half the board is bewildered from a two-day binge review session going on at the moment though. Hopefully some peeps with knowledge of the industry and what impact this might have will chime-in with their thoughts.

Last edited by dhubermex; 10-02-2019 at 04:24 AM.
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Old 10-02-2019, 04:38 AM   #5
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by NerdSuperfly View Post
Massive deal, both (flutter/tsg) have an interesting portfolio ... idk much about flutter, so i'm wondering how this will affect the debt situation re sky and the cost saving attempts at the poker vertical
Any debt used to acquire Sky would not be affected at all by this. As I understand it; it's an all stock merger between Flutter and Stars. Based on the share swap numbers being reported, looks like current Flutter shareholders will own about 55% of the new combined Flutter: so technically Flutter is absorbing Stars. Debt held by Stars and Flutter become debt of the new combined Flutter.
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Old 10-02-2019, 04:52 AM   #6
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

Flutter is on a roll.

If I read the reports correctly, 10B pound deal

Combined enterprise value... 55% Flutter 45% TSG

Thus, Flutter valued TSG at US$ 5.5 Billion, ~25% premium to market close on Tuesday.


in before the this will be good for poker ... bad for poker forecasters..

My forecast.... BAD

Poker was pretty large part of revenue for TSG. So they couldn;t kill the golden goose as quickly as they wanted toward quest of non-poker revenue

Not as much for Flutter / TSG. Golden Goose can be safely fleeced and more quickly.
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Old 10-02-2019, 05:06 AM   #7
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

Let’s hope, RIP Amaya!
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Old 10-02-2019, 05:15 AM   #8
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

having an even larger player in the online gambling market is just bad overall for costumers.
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Old 10-02-2019, 05:22 AM   #9
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

Given the collapsing stock price of TSG (down ~60% since last summer) it might well be a good price for Flutter to buy TSG at.

This was the most persuasive analysis I've seen:
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Old 10-02-2019, 05:52 AM   #10
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

I preferred Alun's earlier, funnier version on the same idea:
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Old 10-02-2019, 05:55 AM   #11
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

Quote:
Originally Posted by nickjehz View Post
having an even larger player in the online gambling market is just bad overall for costumers.
good point. what sort of market share will this new beast have in the sports/casino/poker market?

Quote:
Originally Posted by Josem View Post
This was the most persuasive analysis I've seen:
another good point. There is a form of corruption in the merging / selling of public companies that is rarely discussed.

CEOs are there to represent shareholders and max shareholder value in these deals. However the companies they are negotiating with in mergers are the same ones offering CEOs (and other CXO's) buyouts, bonuses, and other forms of compensation in their new roles with the combined entity. Pretty strong conflict of interest.

Yes, share price increased 25+% overnight. Rafi Ashkenazi remains as COO. At the same time he was negotiating on behalf of TSG shareholders, he was also negotiating on behalf of Rafi. A huge conflict of interest. Nothing against him, this is just a major flaw in the system.


This combined with consistent underestimating of the challenges of merging two businesses with the consistent overestimating of strategic synergies, economies of scale, etc etc.... results in many of these mergers never meeting expectations. That all leads to this typical hyperbole...

Quote:
The merger is expected to deliver substantial value creation for shareholders from pre-tax cost synergies of 140 million pounds per annum, along with potential revenue cross-sell in international markets and lower finance costs, they said. (Reporting by Graham Fahy; Editing by Muralikumar Anantharaman)
blah blah blah
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Old 10-02-2019, 05:55 AM   #12
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by jal300 View Post
Any debt used to acquire Sky would not be affected at all by this. As I understand it; it's an all stock merger between Flutter and Stars. Based on the share swap numbers being reported, looks like current Flutter shareholders will own about 55% of the new combined Flutter: so technically Flutter is absorbing Stars. Debt held by Stars and Flutter become debt of the new combined Flutter.
i'm aware of that (sry, for misleading post from me) ... i was thinking about the future or more precisely, if TSG still tries to reduce costs in the same way as right now, or if the merger gives the new company more options to pay of the debts
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Old 10-02-2019, 05:59 AM   #13
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

Quote:
Originally Posted by ArtyMcFly View Post
I know that quite a lot of Stars people (100+) lost their jobs on Malta and the IoM recently. I presume there will be more job losses as the new company will apparently be controlled from Dublin.

Regulators in the UK and Ireland might look at the threat of monopolistic activities of this new gambling giant, but FWIW I don't see it being stopped. Smaller firms will presumably react by making mergers and acquisitions of their own.
given alle the mergers in recent years (eg GVC and ladbrokes) i doubt anyone will say 'oh, this is too big'). would be interesting if the jobs were cut due to the merger btw.
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Old 10-02-2019, 06:15 AM   #14
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

I know Betfair has historically done everything it could to prevent profitable players from using it's betting exchange. With that in mind I don't see any bright future ahead for winning players.
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Old 10-02-2019, 06:18 AM   #15
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by PTLou View Post
good point. what sort of market share will this new beast have in the sports/casino/poker market?



another good point. There is a form of corruption in the merging / selling of public companies that is rarely discussed.

CEOs are there to represent shareholders and max shareholder value in these deals. However the companies they are negotiating with in mergers are the same ones offering CEOs (and other CXO's) buyouts, bonuses, and other forms of compensation in their new roles with the combined entity. Pretty strong conflict of interest.

Yes, share price increased 25+% overnight. Rafi Ashkenazi remains as COO. At the same time he was negotiating on behalf of TSG shareholders, he was also negotiating on behalf of Rafi. A huge conflict of interest. Nothing against him, this is just a major flaw in the system.


This combined with consistent underestimating of the challenges of merging two businesses with the consistent overestimating of strategic synergies, economies of scale, etc etc.... results in many of these mergers never meeting expectations. That all leads to this typical hyperbole...



blah blah blah
Flutter as I understand is just a bookmaker, whatever market share Stars had in online poker, that's the market share the combined new Flutter will have in online poker.

And CEO's exploring business combinations is not a conflict of interest: ignoring potential buyers could be a bigger problem for a CEO. In any event, if Stars' shareholders are unhappy about this, they will vote it down. You do understand that a CEO and the Board can only recommend to Stars' shareholders to accept the deal, shareholders can still vote as they please.

Ashkenazi is going from being CEO of Stars to COO of the new Flutter. CEO to COO is basically a demotion and most likely he is gone after 12-24 months after the merger, most likely.

I don't think you fully understand business and/or M&A. If you're the CEO working on getting your company acquired by another, you are basically negotiating for you to eventually lose your job. And if you don't like the idea of golden parachutes, think about it: sometimes it's in the shareholders best interest to be acquired, if a CEO didn't have some sort of golden parachute, they would have zero incentive to negotiate the sale of the company, which could be more harmful to shareholders.
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Old 10-02-2019, 06:20 AM   #16
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

Quote:
Originally Posted by PTLou View Post
Poker was pretty large part of revenue for TSG.
It was 30%. Under Flutter, it will be 18%. Further diluted, sure, but TSG already makes more from sports betting.

The business will continue to focus on sports, particularly US markets (it will now operate both Fox Bet and FanDuel in the US, has partnerships with both Boyd and Eldorado), while it hopes its larger size will help stabilize things in Europe.

It really depends how much the new company will lean on the "poker is a great customer acquisition channel" concept. It could well result in more poker investment and less concern over that vertical's profits if it means a growing customer footprint to help sports/casino cross-sell.

Look at GVC - the portfolio is pretty similar to the proposed Flutter (£3 billion in revenue; retail in UK and Europe; various brands, including half a dozen poker brands; online sports is the biggest revenue generator, etc). There we've seen huge investment in poker.


Not saying we'll see the same at Flutter but there's a wide scope of possibilities.
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Old 10-02-2019, 06:23 AM   #17
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by jal300 View Post
Flutter as I understand is just a bookmaker, whatever market share Stars had in online poker, that's the market share the combined new Flutter will have in online poker.

Flutter is retail (paddy power), betting exchange (betfair), deals to expand into US sports betting, big in online sports betting, has decent online casino, has a few ipoker skins, has Adjarabet, which runs a big sports book and its own poker room in Georgia.

Online poker will be 18% under the proposed merger.
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Old 10-02-2019, 06:26 AM   #18
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by NerdSuperfly View Post
i'm aware of that (sry, for misleading post from me) ... i was thinking about the future or more precisely, if TSG still tries to reduce costs in the same way as right now, or if the merger gives the new company more options to pay of the debts
Stars should continue to reduce cost because stars is not profitable: so nothing changes for them in that regard. Usually after an acquisition there is a definite pressure to find cost savings, but that's because debt is usually involved. This was an all stock deal, so there isn't the same pressure to reduce costs because of new debt. That said, there will be a concerted effort to reduce costs: it's one way to achieve value for shareholders.
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Old 10-02-2019, 06:26 AM   #19
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by ArtyMcFly View Post
Regulators in the UK and Ireland might look at the threat of monopolistic activities of this new gambling giant, but FWIW I don't see it being stopped. Smaller firms will presumably react by making mergers and acquisitions of their own.

Given that TSG/SBG acquisition was investigated by the CMA, I can't see how this wont be, but then I haven't seen them actually block these deals. As noted, GVC/Ladbrokes was waved through.
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Old 10-02-2019, 06:34 AM   #20
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by ArtyMcFly View Post
...I know that quite a lot of Stars people (~1500+) lost their jobs on Malta and the IoM and Sydney and London and Costa Rica and Dublin recently. I presume there will be more job losses as the new company will apparently be controlled from Dublin...
fyp
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Old 10-02-2019, 06:48 AM   #21
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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...It really depends how much the new company will lean on the "poker is a great customer acquisition channel" concept. It could well result in more poker investment and less concern over that vertical's profits if it means a growing customer footprint to help sports/casino cross-sell...
In addition, it is theoretically possible to be profitable spend more to acquire (poker) customers if you can extract more money from customers across your multiple products.

Eg, as a stand-alone poker business, if your average revenue per customer is $X, then you need to spend less than $X on acquiring and serving them. If you can also make money from them on other gambling efforts, then your average revenue may increase to $Y, and then you have a higher amount of money you can spend to acquire them. Maybe.
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Old 10-02-2019, 07:59 AM   #22
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

When all is said and done I wouldn't be shocked if Fox ended up buying it all in a few years.
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Old 10-02-2019, 08:28 AM   #23
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

May I be the first to propose that we call the new company 'Stutter'.
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Old 10-02-2019, 08:44 AM   #24
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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Originally Posted by jal300 View Post
And CEO's exploring business combinations is not a conflict of interest: ignoring potential buyers could be a bigger problem for a CEO. In any event, if Stars' shareholders are unhappy about this, they will vote it down. You do understand that a CEO and the Board can only recommend to Stars' shareholders to accept the deal, shareholders can still vote as they please.
This is all sort of OT but just a rant/pet peave of mine when I brought it up.
Yes , I fully understand (through direct experience) M&A deals for public companies.

All you say is true but wasnt my point. . And no, in many cases they are not negotiating themselves out of job. They often negotiate themselves into a new job with all sorts of new comp plans.

All shareholders see is a premium to current stock price. The formal and informal conversations between CXO.s and acquiring company regarding their comp and any new roles are rarely disclosed and if so buried and hard to decipher.

This is absolutely a conflict of interest, but again rarely talked about in M&A world, because all on both sides are being enriched at the personal level. That money is coming out of enterprise value on one side or both sides of deal, and not fully disclosed

I'll quit my rant to keep thread OT.
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Old 10-02-2019, 09:39 AM   #25
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Re: Stars Group to be bought by/merge with Flutter Entertainment (Paddy Power/Betfair)

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This is all sort of OT but just a rant/pet peave of mine when I brought it up.
Yes , I fully understand (through direct experience) M&A deals for public companies.

All you say is true but wasnt my point. . And no, in many cases they are not negotiating themselves out of job. They often negotiate themselves into a new job with all sorts of new comp plans.

All shareholders see is a premium to current stock price. The formal and informal conversations between CXO.s and acquiring company regarding their comp and any new roles are rarely disclosed and if so buried and hard to decipher.

This is absolutely a conflict of interest, but again rarely talked about in M&A world, because all on both sides are being enriched at the personal level. That money is coming out of enterprise value on one side or both sides of deal, and not fully disclosed

I'll quit my rant to keep thread OT.
If you truly have PubCo M&A experience you would know that compensation for executive management of public companies are fully disclosed and not "rarely disclosed" as you state. And it is not buried either, it's almost always in the MD&A under the very obvious heading "Executive Compensation" or something equally obvious.

And what does "being enriched at the personal level" and "money is coming out of enterprise value" rant all about? You are basically saying "I can't believe the janitor gets a salary when that money could be used to increase cashflow and our enterprise value!" True story, employees have a high preference for being compensated. What would happen to enterprise value if you didn't pay your employees fair market rates of compensation?

If you believe this deal is so outrageous and you happen to be a Stars shareholder, vote against it. If you are not a Stars shareholder, why rant about something that will not affect you. Stars shareholders are getting a premium, that's not a terrible thing. Stars' CEO will be the COO of Flutter, so what. You should stop being concerned with how much money other people make, you'll live a happier life.
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