What does not kill you makes you stronger: Flutter-Star Merger heads stronger to the future despite Covid-19 outbreak
The novel coronavirus, which was first discovered in Wuhan, China on the 31st of December, 2019 has now spread throughout the whole world. The Covid-19 outbreak has affected the lives of a hundred thousand people and has impacted multiple industries in every single industry.
The novel virus has been announced as a pandemic by the World Health Organization and many countries have gone in lockdown amid the epidemic. People are encouraged to stay at home and thus, all non-essential businesses are closed all across the world in almost every single country.
May the odds be in our favor
Many sports events and massive gathering events have been canceled or postponed. Even the Summer Olympic Games in Tokyo have been postponed for one year. This is a big hit for the betting and gambling industry in general. The whole system and the profit, as well as the operating systems of the sector, depending on the number of sports events and the participation of fans.
Despite the huge number of canceled or postponed events the betting giants still manage to operate successfully in the market. One of the best-known betting companies Flutters Entertainment made an announcement regarding the biggest merger in the betting industry. Soon after the announcement regarding The Flutter and The Stars was made, the industry slowly began to sink amid the coronavirus outbreak in the whole world.
Despite the pandemic, the long-awaited and exciting merger is going to happen sooner or later, though with the small changes on the way. According to Flutter, the merger is still in progress, though due to the number of canceled events the company needs to save on dividends.
The over 10 billion pound merger between Irish Flutter and Canadian The Star is supposed to be the biggest sports betting powerhouse and the most lucrative merger in the history of the betting industry. According to the most recent announcement the merger will be closed soon, though because of the Covid-19 crisis, the debt burden will be slightly higher than it was originally planned.
Talking about changes regarding the mega-merger, the CEO of The Star, Peter Jackson said that he is very confident in the decision and is very eager to create a great product with a variety of brands and the most diversified portfolio in the market.
The original debt burden of the merger was expected to be 3.5x total earning excluding synergies. Though, due to the ongoing crisis, the ratio will most likely increase. The betting operator also said that they are committed to cut the debt leverage from 1x to 2x it’s total earning, which is “over the medium term”.
Changes have been introduced on the cash payment for dividends as well. The Flutter made an announcement earlier this week, that there will be changes in the €112.7 million final 2019 cash dividend payment plan. So far, the company chose not to pay the dividends, but instead to pay the investors. This should happen before the closure of The Star merger case.
The Irish company is very generous with the comments and made announcements regarding the future partnership. Mr. Jackson said that the partnership outlines the very prospective future for the next generation, considering the cost, the revenue as well as financing synergies. He also stressed the impact of the coronavirus outbreak on the global economy and particularly on the financial profile of the company for this year.
While the Covid-19 has a massive impact on the world economy, the company expected its one full-year EBITA to be up to 100 million pounds more than the current perspective. This assumption was made even before the closure of the betting shops in the UK and Ireland. The EBITA slump does not include cancelation of the events in the UK, Ireland, Australia and neither the Summer Olympic Games in Tokyo.
Covid-19 Financial Impact
The financial impact on the global economy is expected to be very big in every industry. Even the giants of the sectors will have to pay the debts to the global crisis. The Flutter secured the 1.3 billion pound debt arrangement to refinance some of its existing debt as well as of the Stars when the deal closes.
The mega-merger was first announced in the fall of last year. The merger is yet to be confirmed by the shareholders and the regulatory authorities. So far the case was only confirmed by the Australian regulator. The shareholder votes are to be cast on the 21st of April. No news regarding the postponing of the deal has been announced.
Once the merger is closed, the group’s portfolio will be one of the richest in the market with such names as the PokerStar, the Sky Betting, and Gaming, Betfair, Paddy Power, Fanduel and the Sportsbet.