The merger between Flutter Entertainment and The Stars Group will have a slow but long-lasting impact on the entire gambling sector, according to an industry expert.
Julian Buhagiar, co-founder of RB Capital, says that while the deal was not wholly unexpected by investors, the statistics quoted claiming estimated savings of £140m per annum did raise an eyebrow.
Buhagiar said that in an industry in which mergers have proven to be turbulent in the past, ultimately the outcome of the largest M&A deal in the industry to date will take time to become clear.
“The market is overcrowded with too many players co-existing in a crowded space, and that has created a rich environment for mergers and acquisition,” said Buhagiar. “Thus the Flutter-Stars merger did not come as a surprise to many investors. The quoted statistics, however, are of note. The estimated savings of £140m per annum is aspirational at best.”
Both companies are already trading at lower than expected profit margins, Buhagiar noted, with significant overlap – unless another large round of redundancies is on the cards, as has recently happened for some Stars employees on the Isle of Man and Malta.
“History for (mostly PE-backed) gaming mergers of this size have been quite eventful. Witness bwin/Party, Ladbrokes/Coral, and of course Flutter/FanDuel. Also, as is typical for mega-mergers, both companies already influence a significant amount of stakeholders in the gaming supply-chain, and this deal is largely expected to consolidate revenues. Moreover – assuming local regulatory and legislative approvals take place without any delays – expect a slow transition, which will lead to uncertainties across the spectrum until the merger is finalised, which will take years to achieve the aforementioned synergies.
“What’s for sure, is that this merger will be highly disruptive not just for the two players involved, but also for the entire industry, and for a good few years to come.”
