LONDON (Alliance News) - Merger and acquisition fever in the UK gambling industry showed no signs of abating on Wednesday after Betfair Group PLC and Paddy Power PLC said they have reached an agreement in principle to merge in an all-share deal.
Under the terms of the merger, Paddy Power shareholders would own 52% of the combined company, with the remaining 48% owned by Betfair shareholders. Immediately prior to completion of the deal, Paddy Power's shareholders would get an EUR80 million special dividend.
Gary McCann, the chairman of Paddy Power, would become the chairman of the combined group, with Betfair Chief Executive Breon Corcoran to become chief executive. Paddy Power Chief Executive Andy McCue would become chief operating officer and an executive director, while Betfair Chief Financial Officer Alex Gersh would take the same role in the combined company.
The deal would create a betting company with more than GBP1.1 billion in revenue, based on the last annual financial results from the pair, and the two said the deal would mean they could better compete in existing and new markets.
"The proposed merger with Paddy Power is hugely exciting. It would create a truly global sports betting group with unmatched products and talent, and significantly enhanced scale," said Betfair's Corcoran.
The news came as Paddy Power published its interim results for the six months to the end of June and as Betfair issued its first quarter trading update.
Paddy Power said its operating profit grew 33% to EUR80.0 million in the first half, despite taking a EUR32.0 million hit from new taxes and product fees, and the group now expects its operating profit to come in ahead of market expectations for the full year.
The group said its net revenue in the half was up 25%, driven by double-digit retail and online divisional growth, and said it will pay an interim dividend of 60.00 euro cents per share, up 20%.
"We have made substantial progress implementing the strategy we set out in March, with further payback to come from new mobile product releases, refreshed marketing campaigns and efficiency gains. We now expect full year 2015 reported operating profit to be a mid to high single digit percentage above 2014 and the consensus market forecast," said Paddy Power Chief Executive McCue.
Betfair, meanwhile, said its revenue in the first quarter to the end of July was up 15% to GBP135.4 million, despite the tough comparable for the year earlier, when the World Cup was held. Revenue from sustainable, or regulated, markets was up by 24% to GBP116.3 million, while mobile revenue was up 57%.
Earnings before interest, taxation, depreciation and amortisation in the first quarter was up by 19% to GBP41.0 million, the company said, though this excludes a GBP12.8 million hit it will take from the implementation of the point-of-consumption tax in the UK.
"These results represent another strong performance. Double-digit revenue growth against the period containing the World Cup last year is particularly encouraging and was ahead of our expectations," said Betfair Chief Executive Breon Corcoran.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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