Flutter Cuts Dividends, but Merger to Go Ahead

Flutter Entertainment is set to go ahead in its merger with Canadian gambling giant, The Stars Group, despite the impact of the COVID-19 pandemic on the industry. The £9.6 billion deal had been cast into doubt, but shareholders will still vote on it this month. However, Flutter has had to overhaul its dividend payments to cut costs.

A businessman signing a deal with a pen.

The merger is set to create the biggest online betting and gambling firm in the world. ©Helloquence/Unsplash

Merger Will Move Forward

Last October Flutter Entertainment agreed to purchase Canadian gambling company, The Stars Group. The £9.6 billion deal will still go ahead, despite setbacks arising from the coronavirus outbreak. Shareholders are yet to vote on the merger, but if it goes ahead it will create the largest online betting and gambling company in the world, based on revenue.

In the terms of the deal, Flutter will acquire all shares in The Stars Group. It will then join the companies to create a combined business with an expected revenue of £3.8 billion. The Stars Group, which acquired Sky Betting & Gaming in 2018, is one of the world’s leading online gaming and entertainment companies.

However, Flutter Entertainment, previously known as Paddy Power Betfair, has radically curbed dividend payments in response to the COVID-19 outbreak. The UK based gambling firm will no longer pay out its 2019 dividend in cash, instead offering company shares. The 2020 dividend payment has also been canceled. The Stars Group has never paid dividends, and it is unlikely to start doing so following the merger.

Flutter has also made new debt arrangements. To liquefy further assets, Flutter will take out £1.3 billion loan and credit facility, provided that it completes its merger with The Stars Group. Doubt had been cast on whether the deal would still go ahead, but members of both company boards have allayed concerns.

Flutter’s Peter Jackson offered this assurance. “In these challenging times I am more convinced than ever of the strategic fit of these two complementary businesses.”. This month, on , shareholders are due to vote on the merger between Flutter Entertainment and The Stars Group.

In total, Flutter hopes to save around £200 million. Earlier this month Flutter estimated that disruption and cancellations caused by the outbreak could have an impact upwards of £90-110 million on its full-year earnings.

“The challenge currently facing our business and the industry more widely is unprecedented in modern times. Our focus, first and foremost, is on protecting the welfare of our employees and our customers and we will leave nothing to chance in this regard. While our near-term profitability will be impacted by the essential measures being taken globally, the Board will remain focused on protecting shareholder value and managing the business through these turbulent times.”Peter Jackson, Chief Executive, Flutter Entertainment

Flutter Feels Pandemic Impact

Like other gambling firms, Flutter has been hit hard by the coronavirus pandemic, which has seen most calendar sports events canceled. Most recently, the Tokyo Olympics have been set back to July 2021. As governments have advised the population to self-isolate, sports books and casinos have also had to close their doors to the public. While the situation is expected to trigger a growth in online wagering, it is still a blow to the industry.

There has also been a reshuffle in board members, as the two firms prepare to combine. Rafi Ashkenazi will no longer take on the role of chief operating officer at the newly merged company. Ashkenazi, who is currently the chief executive at Poker Stars as well as owner of Sky Bet, will instead become a non-executive director. Peter Jackson, chief executive at Flutter has welcomed Ashkenazi.

“The combined business will enjoy improved geographic and product diversification and allow us to advance our strategic goals. I am delighted that Rafi has agreed to join the Flutter Board and to be available to me as a consultant given his extensive knowledge of Stars’ international business.”

Flutter’s team of non-executive directors will be Divyesh Gadhia, Rafi Ashkenazi, Richard Flint, Alfred Hurley, Jr, David Lazzarato and Mary Turner. Group chief executive Peter Jackson, with three regional chief executives who report to him, will continue to head Flutter.

“I am looking forward to working with the new Flutter board in realizing the exciting opportunities that will emerge from the combination of these two great companies. I would like to take this opportunity to note the commitment and dedication shown by Emer and Jan during their time on the Flutter Board, to thank them for their support and to wish them both well for the future.”Gary McGann, Chairman, Flutter Entertainment

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