Bookies Betfair and Paddy Power agree in principle to merger terms

(ShareCast News) - Shares in Paddy Power and Betfair surged on Wednesday as they announced they have agreed in principle to a possible merger that would create one of the world's largest public online betting and gaming companies by revenue.Betfair said on Wednesday that the combination has compelling strategic logic and represents an attractive opportunity for both companies to enhance their position in online betting and gaming and to deliver synergies, customer benefits and shareholder value.Under the terms of the agreement, Paddy Power shareholders would own 52% of the combined group, which would have revenues of over £1.1bn, while Betfair shareholders would own the rest. Prior to completion, Paddy Power shareholders would receive a special dividend of €80m.Paddy Power's chairman, Gary McGann, would become chairman of the board of the combined group, while Betfair's chief executive officer, Breon Corcoran, would become CEO.Betfair said the structure of the possible merger is being finalised with the intention to maximise benefits to shareholders and other stakeholders, and it is expected that the combined group will maintain a significant presence in Ireland and in the UK.The companies said talks were ongoing regarding the other terms of the possible merger.Betfair's chief executive officer Breon Corcoran said: "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."Olivetree Securities said that at first glance, this appears to be a sensible transaction, both in terms of strategy and structure, and there should be a high likelihood the deal comes to fruition."It is very much in keeping with Betfair's strategy to roll out and become more mass market, whilst it offers Paddy Power shareholders a small premium, scale and also exposure to the niche 'exchange' market," it said.Olivetree said the synergies should be excellent, so the market should like the proposed combination, with links so strong between the two managements it would seem unlikely that there is any real scope for interloping here.At 0841 BST, Betfair shares were up 18.7% at 3,090p, while Paddy Power was up 16.7% at 91.63p.