CMA to investigate Flutter and Stars Group merger

The UK’s CMA has taken an interest in the merger between Flutter and The Stars Group

The UK Competition and Markets Authority (CMA) has announced it plans to investigate the merger between Flutter Entertainment and The Stars Group (TSG) that was announced in October 2019.

Details about the merger

Under the deal, Flutter will exchange 0.2253 new shares for each share of TSG. Flutter shareholders will own about 54.64% of shares in the new combined business while TSG shareholders will hold the remaining shares. The merged company will continue to operate under the Flutter Entertainment name.

The companies hope to deliver substantial value creation for shareholders from pre-tax cost synergies of £140 million per annum and potential revenue cross-sell in international markets and lower finance costs.

Once Flutter finalizes its purchase of TSG it will form a combined business with an annual revenue of $4.7bn (£3.8bn). When the deal was made, Flutter said the merger would create the largest online gambling company on the planet.

Board members at TSG and Flutter also assured stakeholders that the merger would pass any obstacles relating to competition. But now, with the news of a CMA investigation that might not be the case.

The reason behind the CMA investigation

The CMA announced on Tuesday 4 February, that it will be conducting an investigation into proposed merger and whether it “will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom.”

Any parties that are involved in the deal have been invited to submit comments by 18 February.

Aside from the investigation, the merger is still subject to several closing conditions and the approval of shareholders from both companies.  On top of this, the deal requires approval from the London Stock Exchange, FCA and Euronext Dublin and regulatory approval in the UK, Ireland, US, Canada and Australia.

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