The Stars Group to acquire Sky Betting and Gaming in $4.7bn deal

The Stars Group, home to PokerStars, the world’s biggest poker brand, is to acquire leading UK operator Sky Betting and Gaming from CVC Capital and Sky plc in a cash and stock deal worth $4.7bn, in the process creating the world’s largest publicly listed online gaming company.

The Stars Group expects the deal to lead to the development of sports betting “as a second low-cost customer acquisition channel,” complementing the group’s core poker business and boosting cross-selling opportunities.

In partnership with leading sports broadcaster Sky, Sky Betting and Gaming has become home to leading online UK brands Sky Bet, Sky Vegas and Sky Casino.

The transaction is expected to close in the third quarter of 2018. The $4.7bn headline sum comprises $3.6bn in cash with the remainder payable in approximately 37.9 million newly issued common shares. The new shares will represent around 20 per cent of The Stars Group’s issued and outstanding common shares

“The acquisition of Sky Betting and Gaming is a landmark moment in The Stars Group’s history,” said Rafi Ashkenazi, The Stars Group CEO.

“SBG operates one of the world’s fastest growing sportsbooks and is one of the UK’s leading gaming providers. SBG’s premier sports betting product is the ideal complement to our industry-leading poker platform.

“The ability to offer two low-cost acquisition channels of this magnitude provides The Stars Group with great growth potential and will significantly increase our ability to create winning moments for our customers,” said Ashkenazi.

“Following this transaction, The Stars Group will have significantly enhanced scale and a highly-regarded global brand portfolio. As a result, we are well positioned to realise our vision of becoming the world’s favourite igaming destination.”

In a statement, The Stars Group identified cost synergies of “at least $70m per year”. SBG is currently home to the UK’s largest active online player base, with more than 80 per cent of revenues generated from mobile devices.

SBG’s unaudited annual revenue was £624m while unaudited adjusted EBITDA was £202m in the 12-month period to December 31, 2017.

“We are delighted to join forces with The Stars Group,” said Richard Flint, Sky Betting and Gaming CEO.

“We have had a fantastic last few years and would like to thank CVC and Sky for supporting us in becoming a leading online operator in the UK. This transaction allows us to offer our best-in-class products to a truly global audience. We’re excited about our future together.”

Pev Hooper, partner at CVC, added: “Richard and his team have done a fantastic job building SBG into one of the UK’s largest and fastest growing operators. We have thoroughly enjoyed working closely with the team and our partners at Sky. This combination with The Stars Group opens a new and exciting chapter for SBG to accelerate its international growth, and we look forward to continuing the journey as a shareholder in the combined group.”

Diversification through acquisition

The Stars Group’s announced acquisitions since the beginning of 2018 are set to significantly diversify the company’s revenue base.

Following the completed acquisitions of SBG, CrownBet and William Hill Australia, the company’s 2017 revenue mix by product would have been 37 per cent poker, 34 per cent sportsbook and 26 per cent casino, while 75 per cent of The Stars Group’s 2017 revenues would have been generated within locally regulated or taxed markets.

Completion of the SBG transaction is conditional upon obtaining customary approvals from the Toronto Stock Exchange, Nasdaq and certain gaming and other regulatory authorities, as well as the completion of other closing conditions although approval from The Stars Group shareholders is not required.