The Stars Group (TSG) chief executive Rafi Ashkenazi will not take up the post of COO at the combined Flutter/Stars company as planned when the two giants merge.
In a market update Friday, Stars said Ashkenazi will instead be available as a consultant to CEO Peter Jackson. He’ll additionally join the Board in a non-executive capacity.
The companies said they reached their decision following extensive discussions about “the optimal construction” of the senior executive team.
The groups also cited “a number of personal considerations” for Ashkenazi.
Despite the change and the ongoing coronavirus pandemic, Flutter said the merger rationale remains intact.
“In these challenging times I am more convinced than ever of the strategic fit of these two complementary businesses,” said Jackson.
“The combined business will enjoy improved geographic and product diversification and allow us to advance our strategic goals. We continue to work with various competition and anti-trust authorities globally to secure the few remaining approvals required.”
The deal has been approved by Australian authorities and is currently under review by UK competition regulators.
There are new dangers for the deal, however, including increased leverage after completion.
The combined group was expected to have a debt burden of 3.5x earnings before synergies, but Flutter warned the ratio will be some measure higher — as earnings for both companies have fallen.
The company said earlier this month the ongoing sport stoppages would cost it something like $60 million EBITDA per month.
Likewise, TSG did not provide an exact figure but said it could better withstand the stoppages. More than 62% of its 2019 revenues came from casino and poker. Both verticals have seen an uptick without sports.
The COVID-19 disruption also saw Flutter cancel a proposed $124 million dividend to shareholders ahead of the deal. Company shares were down 8% from open on Friday, with TSG down 6%.
Shareholders of both companies will vote on the transaction on April 24.