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Gambling giants Flutter and The Stars Group (TSG) took the industry by surprise last year in announcing their planned union.
Despite the difficulties currently facing the industry — and the world in general — that $6 billion deal is now scheduled to go forward as planned next week.
Both companies are themselves conglomerates comprising several important brands.
Prior to its US acquisition of FanDuel, Flutter was born out of a merger between Paddy Power and Betfair. TSG was formerly Amaya, the company through which PokerStars went public by reverse takeover. It has likewise acquired several additional brands since, most importantly the UK’s Sky Betting and Gaming (SBG).
Shareholders of both groups gave their votes of approval last week, and the deal is now progressing swiftly toward closing.
The bigger challenge, however, will be what comes next.
Flutter has used what it calls a “federal operating model” since January 2018, shortly before it acquired FanDuel. This sort of decentralized approach emphasizes geographical regions rather than individual brands or departmental functions.
TSG will have to dismantle its existing corporate structure in order to fit into that framework. PokerStars itself will have its US operations split off from its international business, while other companies it owns will be assigned to the relevant reporting segment of Flutter.
There will initially be five such segments:
Each of these segments will operate mostly autonomously, relying on its own regional expertise. The main function of the overarching corporation will simply be to provide resources to the regional segments and centralize a few shared functions for cost-saving reasons.
Such a restructuring could have a bigger impact on the US online gambling market than elsewhere.
Until recently, PokerStars was far more focused on its poker product than anything else. Meanwhile, TSG’s acquisition of SBG came recently enough that there hasn’t been much visible change in the company’s approach to the UK market.
On the other end of things, FanDuel has been operating more or less autonomously all along. Apart from its operations in New Jersey, Flutter has no other significant US presence.
Now all of the sudden, PokerStars’ US operations will be split off from the rest of the company. Instead, it will be working more closely with FanDuel and Fox Bet.
How exactly that manifests itself remains to be seen. PokerStars, FanDuel, and Fox all have strong brand recognition in the US. Their overlapping target markets, however, are somewhat different.
FanDuel has no poker product, so it seems clear enough that the PokerStars brand will carry the banner for that segment. It’s less clear what will happen with FanDuel and Fox Bet in markets where, until now, the two have been in direct competition.
Flutter says that it expects this five-segment structure to be temporary. Once things settle down somewhat, it plans on a bit of further reorganization. This will result in a corporate structure with only four reporting segments, a feat which will be achieved in two steps.
First, the TSGI segment will be incorporated into PPB.
Next, Paddy Power will be removed from that segment. That brand is more narrowly focused on the UK and Ireland than either PokerStars or Betfair. Paddy Power will therefore be lumped together with SBG to form a new segment for the UK and Ireland.
The resulting structure will be as follows: