The merger of Paddy Power and Betfair will create a prominent player in the market

Deal

The largest deal in history took place on the bookmaker market. The merger of two companies - Ireland's Paddy Power and England's Betfair - will create a monster valued at £5 billion and annual revenue of £1.1 billion.

Yesterday, betting companies Paddy Power and Betfair announced they had reached an agreement to merge. In the new holding, 52% will belong to the Irish group, and 48% to the English group. Gary McGann, the chairman of Paddy Power, whose shareholders are guaranteed a special dividend in connection with the merger in the amount of €80 million, will take the same position, and Breon Corcoran, the head of Betfair, will be the chief executive. Mr Corcoran said the "two different but phenomenally strong brands" would take "leading positions in the UK, Ireland, Australia and the US". However, both companies emphasize that in fact the holding’s ambitions are not limited to these regions.

The deal continued a fresh trend that has emerged in the bookmaker business. It has been on the path of consolidation for several months now. Previously, Ladbrokes and Gala Coral announced a merger, while 888 and GVC Holdings are bidding to buy Bwin. But it was the agreement between Paddy Power and Betfair that really rocked the market.

The fact is that we are talking about an alliance of two giants that can really complement each other and create a synergistic effect. Paddy Power, sponsor of the Manchester City club, is a classic bookmaker that is successfully developing both live and online betting. At the same time, it has recently gained wild popularity even among those who are not into the game, thanks to original, often borderline foul, marketing moves. She is remembered for her decision to pay out the winnings to those who bet on the New Zealand team to win the World Cup in 2011 even before her final match with the French was played, considering the superiority of the New Zealanders indisputable, and for the demonstration of underpants with the company logo during the celebration of the goal at European Championship in 2012 by Danish forward Niklas Bentner, and wishes for success of the English team at the world championship in 2014, cut down in the Amazon forests, and other actions.

Betfair, created in 2000, on the other hand, can be considered a new addition to the market. This is the first large Internet exchange, most of whose activities are carried out online, and its essence lies in the fact that users essentially play with each other, determining the odds with their bets. Unlike classic bookmakers, Betfair lives not on losing bets, but on winning ones, charging a percentage from them (usually 5%). The company's most valuable asset may be its unique internet technology, while Paddy Power's most valuable asset is its 600 betting outlets, half of which are located in the UK.

At the same time, the latest financial indicators of the two members of the alliance look excellent and prove the promise of the bookmaker business as a whole. According to Betfair's report, its revenues (£393.6 million in 2014) rose 19% over the past three months, despite rising taxes on betting in the UK. According to Paddy Power's report, in the first half of this year its profit increased by a third to €80 million. The company's income in 2012 was €653.8 million.

The capitalization of Paddy Power is estimated at €3.46 billion, and Betfair - at £2.43 billion. The total value of the new holding, taking into account the jump in share prices in connection with the merger (for the Irish company - by 18%, for the English company - by 17% ), analysts define as exceeding £5 billion. It is more than twice the value of the Ladbrokes and Gala Coral alliance - £2.3 billion.

Alexey Dospehov

Bookmakers hit $5 billion