26th August 2015
As Paddy Power and Betfair announce potential merger plans, Ian Forrest, investment research analyst at The Share Centre, explains what it could mean for investors…
News broke this morning of Paddy Power and Betfair’s plans for a potential merger. If the deal goes ahead, the market will see the creation of a company with revenues of over £1.1bn. As a combined group, the company will become a stronger rival to others within the gambling sector. Paddy Power investors will be pleased to see that a one-off dividend of €80m would be issued to them prior to the merger. It is also worth noting that Paddy Power shareholders would own 52% of the company, with those invested in Betfair holding 48%.
Investors interested in the sector may notice that the UK gambling market is currently going through substantial change. This is significant due to many customers opting for online services, along with the effects of recent tax changes and new industry regulations. We believe that betting companies are combining as size has become increasingly important. This is reflected in the recent Ladbrokes-Gala Coral merger, as well as the attempts by 888 Holdings and GVC to take over Bwin.party. Current investors will be keeping an eye on the sector for further revelations after this most recent merger.