The Stars Group Finalizes Sky Betting Acquisition for $4.7 Billion

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Wednesday, July 11th, 2018 | Written by Stephen Smith

On April 21, The Stars Group (TSG) announced its intention to buy Sky Betting & Gaming (SBG) in a cash and stock transaction worth $4.7 billion, subject to approval from regulatory bodies associated with the Nasdaq (USA) and Toronto Stock Exchange (Canada). The process appears to have gone smoothly, and the company behind PokerStars has now completed the acquisition after successfully raising $622 million in capital through a public offering.

The deal transforms The Stars Group into the world’s largest publicly listed online gaming company, and commenting upon the transaction that merges the two brand portfolios, Rafi Ashkenazi, The Stars Group’s Chief Executive Officer, stated:

“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.”

End of a Long Search

For three years, The Stars Group has sought a partner that would enable it to balance its online gambling products, and grow as a company. During that time, the operator explored a number of possible acquisitions, the most notable of which involved 888 and William Hill. While none of these were realized, The Stars Group did make headway in the Australian market this year after securing a controlling interest in CrownBet in February, followed by its acquisition of William Hill Australia in March.

The Stars Group’s latest deal involving Sky Betting & Gaming subsequently represents a major milestone in the company’s search to realize the scale and product range its long-term strategy envisions.

Benefits of the Deal

The $4.7 billion deal creates a wide range of benefits for The Stars Group, the main ones of which can be summarized as follows:

– Revenue Diversity: There will be a more balanced revenue spread across the company’s poker, casino and sportsbook products.

– Regulated Markets: The deal increases the company’s revenues derived from regulated markets to around 75%, overall.

– Acquisitions via Sports Betting: In addition to complementing its existing core offerings, the deal grants The Stars Group the opportunity to “cross-sell players across multiple verticals”.

– Enhanced Product and Tech: The acquisition of Sky Betting & Gaming helps enhance The Stars Group’s portfolio of products and technology through the addition of its sportsbook, casino games, and innovative mobile apps.

Sky Bet

Sky Bet is one of the most popular brands in the UK’s online sports betting market, with its popularity overtaking that of other major competitors in recent years, including William Hill and Ladbrokes. Integral to its success has been its mobile-betting operation, which accounts for a massive 80% share of all revenues.

Last year, SBG reported £516 million ($685m) in revenue, up by an impressive 38% versus 2016, with pre-tax profits up to June 30th then coming in at £146 million, marking a similar 38% year-on-year improvement compared to the £105 million reported in 2016. This hugely positive trend has continued into H1 of 2018, too, with the company’s revenue soaring by 58% to £210 million.

The Stars Group

PokerStars started offering real money poker products in December, 2001, and by 2006 had become the world’s biggest online poker room, supplanting PartyPoker whose operation shrunk dramatically after withdrawing from the US market following the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA).

In August, 2014, The Stars Group, formerly known as Amaya Inc, then bought PokerStars for $4.9 billion, and in a departure from the poker room’s previous focus soon set about introducing a variety of other gambling type games to complement its product offering. Over the ensuing years, The Star Group has evolved into a truly balanced internet gaming firm, with its revenue in 2017 distributed fairly evenly between poker (37%), and its sportsbook (34%) and casino (26%) verticals.

Sports Betting Key

Commenting upon the addition of Sky Betting & Gaming to the company’s portfolio of businesses, Rafi Ashkenazi, explained:

“SBG operates one of the world’s fastest-growing sports books and is one of the United Kingdom’s leading gaming providers. SBG’s premier sports betting product is the ideal complement to our industry-leading poker platform.”

In fact, the deal implies cost synergies of around $70 million per year, which on the surface may seem a rather high amount. In addition to its strong presence in the UK sports betting market, however, the deal was likely given a further boost following the US Supreme Court’s decision in May to strike down PASPA, in the process increasing the potential value of sports betting companies.