Flutter Entertainment, owner of Paddy Power bookmakers, has launched a share sale that is expected to raise about €900 million, as it seeks to cut its debt burden in an uncertain market after merging with Canadian rival the Stars Group.
The group also said that the transaction will give it the financial flexibility to take advantage of opportunities that might fall out of the Covid-19 crisis.
The move comes just weeks after it completed its merger with Stars Group to create an Irish-headquartered gambling giant with revenues close to €5 billion a year.
The company announced after the Dublin stock market closed that it has hired Goldman Sachs and Davy to place 8.045 million new shares, the equivalent of 5.5 per cent of current total stock count, in the market. Allowing for a 5 per cent typical discount that could apply to such a deal, it may raise about €900 million.
Flutter said in March that it expected the merger would leave it with net debt of more than 3.5 times earnings before interest, tax, depreciation and amortisation (ebitda), excluding synergies. It now expects the burden to fall by 0.9 times ebitda by the end of this year, based on proceeds from the share placing and the market consensus that its full-year earnings will amount to €950 million.
Regulation
“Flutter believes that one potential consequence of the Covid pandemic is that the pace of regulation in the US could accelerate, as an increasing number of US states look for new ways to raise additional sources of tax income,” the group said. “Flutter is determined to give its US business the best possible platform for future success and to replicate the leadership position it has achieved in the states that have regulated to date.”
Flutter said it will look to invest to secure additional market access deals in individual US states.
“In addition, investment in customer acquisition will also likely increase should the pace of regulation accelerate, and the scale of the market opportunity prove to be bigger than previously anticipated,” it said. “The proceeds from the placing will provide Flutter with greater financial flexibility to support these investments and allow it to move quickly should compelling opportunities emerge.”
Flutter said in a trading update that pro-forma group revenue has increased by an annual 10 per cent in the second quarter to date, despite widespread ongoing disruption to global sports.
“This performance reflects the newly combined group’s enhanced product and geographic diversification; good online poker and gaming performance has offset reduced sports revenue while strong momentum in both Australia and the US has helped to partially mitigate the impact of national lockdowns, particularly in Europe,” it said.
Sports revenues
Sports revenues have been “materially impacted” by the disruption to the sporting calendar across all geographies, it said. However, revenue in Australia and its TVG online betting business in the US have benefited from the continuation of horseracing behind closed doors, and a move of retail customers to online.
Online poker and gaming revenue have also benefitted from lockdowns internationally, it said. “As restrictions have begun to lift, however, year-on-year growth has started to moderate, and we anticipate that this trend will accelerate as more economies open up,” it said.
Flutter owns Paddy Power, betting exchange Betfair, FanDuel in the US, Sportsbet in Australia and several other businesses. The merger added Sky Bet, Poker Stars and Full Tilt Poker along with other online betting operations.
