The Stars Group is now the biggest online gaming company in the world

The Stars Group Is Now The Largest Public Online Gaming Company After Completing Sky Betting Deal

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The Stars Group has publicly announced that it has completed its acquisition of Sky Betting and Gaming (SBG).

  • The deal press release is available here

The deal makes The Stars Group the largest publicly quoted online gaming company in the world.

Rafi Ashkenazi, The Stars Group chief executive, was clearly triumphant in the announcement:

“This transaction creates the world’s largest publicly listed online gaming company and unites two iconic brand portfolios with strong technology platforms and teams. This significant scale also positions The Stars Group to both secure and expand upon its global footprint.”

The end of a long search for a partner

For at least the last three years the Stars Group has been looking for a partner that could help it achieve the scale and product balance that its strategy envisioned.

Right from the moment Amaya bought PokerStars it was evident that there was enormous value to be gained from increasing the product range beyond online poker.

Either as target or acquirer, the Group has explored joining with 888 and William Hill and certainly others whose interest didn’t make it to the point of a public declaration.

In the meantime, Stars has acquired smaller companies, including William Hill Australia and a controlling interest in CrownBet, also in the Australian market.

With this deal, Askenazi has finally put the Stars Group in the position to which it has aspired for so long.

The deal rationale and benefits are summarized as:

  • Improving revenue diversity: “creating a balanced spread across poker, casino and sportsbook with a broad geographic reach.”
  • Increased presence in regulated markets: “to approximately 75% of combined revenues.”
  • Developing sports betting as a second customer acquisition channel: “complementing The Stars Group’s core offerings and creating an opportunity to cross-sell players across multiple verticals.”
  • Enhanced products and technology: “through the addition of SBG’s innovative sportsbook and casino offerings and portfolio of popular mobile apps.”

Acquisition complete now time to deliver

Of course, now that the acquisition is complete, Ashkenazi’s glories will quickly fade into the past, and he will be measured on his performance in executing the merger and expansion of the new group.

Investors have bid Stars shares up to all-time highs in their enthusiasm for the deal, they will now expect to see Ashkenazi deliver.

The purchase price was a hefty $4.7 billion, a multiple of “12.8x unaudited adjusted LTM EBITDA, including expected run-rate cost synergies.”

That implies cost synergies of roughly $70 million per annum, a stretch target if ever there was one.

One factor which will help Ashkenazi is that the US Supreme Court has made sports betting companies more valuable following its ruling on PASPA which allows US states to legalize sports betting.

SBG’s biggest asset at the moment may well be its sports betting platform and its strength in the UK, one of the largest sports betting markets in the world.

Askenazi commented:

“This acquisition represents a pivotal moment in The Stars Group’s evolution. SBG’s mobile-focused sportsbook pairs well with our industry-leading poker offering to create two premier customer acquisition channels. We believe this combination along with our combined online casino offerings positions The Stars Group for continued growth in the evolving online gaming industry.”

Stars raised the cash to buy Sky in two months

Since the deal was first announced on April 21 this year, Stars has been active in raising the money it needed to make the deal go ahead.

Today’s press release announcing the completion of the acquisition explains that financing was:

“…comprised of a combination of cash and approximately 37.9 million newly-issued common shares of The Stars Group. The cash consideration of the acquisition was financed through cash on the balance sheet, proceeds from The Stars Group’s recent equity offering and newly issued debt consisting of:

$100 million from its revolving credit facility, which was increased to $700 million, priced at LIBOR plus 3.25% and maturing in five years;
$4,567 million equivalent in new first lien term loans, comprising a U.S. dollar denominated tranche of $3,575 million priced at LIBOR plus 3.50% and a Euro denominated tranche of €850 million priced at Euribor plus 3.75%, and each with a 0% floor and maturing in seven years; and $1,000 million in 7.0% unsecured senior notes due July 2026.”

The finance for a $4.7 billion deal doesn’t come simply.

- A former founder of Poker Industry Pro and Head of Content at PokerNews publisher iBus Media, Joss Wood is a graduate in English from the University of Birmingham. Joss also holds a master’s degree in Organisational Development from the University of Manchester. His career path has taken him from the British Army, through business and finance to seven years as a successful professional poker player.
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