* New firm to be called Paddy Power Betfair
* Betfair shareholders to get 0.4254 new shares in combinedgroup
* Paddy Power s'holders to get special dividend of 80 mlneuros
* Will be UK online betting market leader
* Both firms recommend shareholders to back deal (Updates value in headline and first paragraph, adds shares,advisers, detail on deal)
By Conor Humphries
DUBLIN, Sept 8 (Reuters) - Betfair and Irish rivalPaddy Power have reached agreement on a 6 billion pound($9.2 billion)combination, first set out last month and designedto secure leadership of Britain's competitive online gamblingmarket.
As in a provisional deal announced in August, Paddy Powershareholders will own 52 percent of the group with Betfairinvestors owning the rest, if the deal is approved byshareholders, Betfair said on Tuesday.
The betting sector has seen a string of deals this year, ascompanies respond to tighter regulation and higher tax bills inBritain and across Europe by looking to bulk up and bettercompete in an online market buoyed by the increasing use ofmobiles and tablets.
Ladbrokes and Gala Coral struck an all-share deal inJuly, while GVC Holdings last week agreed to buyBwin.party Digital Entertainment.
Under the latest deal, shareholders of Betfair - anexclusively online business best known for technology whichallows gamblers to bet against each other as opposed to takingodds offered by a bookmaker - will receive 0.4254 new shares inthe combined group in exchange for each Betfair share.
Paddy Power shareholders will receive a special dividend of80 million euros.
The new group, which will be called Paddy Power Betfair andwhose stock market value would be some 6 billion pounds on thebasis of the combined valuations of the two partners, will bemarket leader online in the UK with a share of 16 percent,according to industry data.
That would surpass a merged Ladbrokes Coral group on 14percent, as well as William Hill and privately ownedBet365.
Betfair chief Breon Corcoran, formerly chief operatingofficer at Paddy Power, will be CEO of the new group, which willhave a premium listing on the London Stock Exchange and asecondary listing on the Irish Stock Exchange.
The combined group will target a dividend payout ratio ofapproximately 50 per cent of profit after tax, the statementsaid. Betfair said the deal was expected to secure recurringannual pretax cost synergies of approximately 50 million pounds.
Shares in the two groups, which had shot higher onannouncement of the deal, were little changed on itsconfirmation on Tuesday.
Both brands will operate side by side in Europe and willoperate Paddy Power's portfolio of almost 600 betting shops,more than half in Britain.
Paddy Power was advised by Morgan Stanley and IBICorporate Finance on the deal. Betfair was advised by GoldmanSachs.
($1 = 0.6502 pounds) (Editing by Jason Neely and David Holmes)
