Paddy Power PokerStars Merger a Pipe Dream?

Analysts say a merger between UK’s Paddy Power Betfair and Canada’s Stars Group would create unfair competition.

That cat’s out of the bag, but it looks like the dish ran away with the spoon some time ago, and the dog is still having a good chuckle over it. According to one UK media source, two online gambling power houses were in merger talks last year. But the storm blew over before the public caught wind of it.

UK's Paddy Power Betfair + Canada's Stars Group = Unfair Competition?

The Sunday Times reported on January 27, 2019 that Paddy Power Betfair and The Stars Group held discussions about a possible merger. If it’s true—no sources were quoted in the article—it’s unlikely such a bond would ever be approved due the enormity of the situation.

UK’s Paddy Power Betfair + Canada’s Stars Group

Paddy Power was founded in 1988, starting out as a steadfast bookmaker in Dublin, Ireland. Through brow-raising, oft-times questionable marketing tactics, it grew to become one of the UK’s major operators, both on land and online. Three years ago, Paddy Power merged with Betfair, another major player in the UK gambling market. Then in July 2018, the company completed another head-turning merger with FanDuel.

The Stars Group, formerly Amaya Gaming, was a small-time company in Canada until then-owner David Bazaav made a shrewd move to purchase PokerStars‘ parent company in 2014 for $4.9bn. PokerStars was already the largest online poker site in the world. Since then, Amaya was rebranded, the business was expanded in multiple directions, including online casino and sports betting, and the company has swallowed up a number of competitor brands, including Australia’s Crown Bet.

In July 2018, while Paddy Power Betfair was bursting at the seams with its FanDuel merger, Stars Group was making global headlines with the jaw-dropping acquisition of one of the UK’s largest multi-channel betting conglomerates, SkyBet.

Now, if you were to put these two global brands together, analysts suggest it would create a company of such phantasmagoric proportions, no other operator could possibly stand in its wake.

Paddy Power PokerStars a Pipe Dream

The Sunday Times indicates that the “secret talks”, which they say took place sometime “late last year”, are “no longer… on-going”. The report suggests the cessation of communications between the two may have been the result of obvious indications that a giant corporation of that magnitude would never be approved by local regulators on either end of the regional spectrum.

A successful merger would create a business worth around CA$14.65 billion (£8.4bn). No existing company comes anywhere near that value—not even GVC Holdings, which controls a multitude of high-profile gambling businesses, including Ladbrokes, Coral, Gala Casinos, Foxy Bingo, Sportingbet, and others.

The real question is, why is Stars Group interested, and what would encourage Paddy Power Betfair to consider such an offer. The answer is the same reason so many UK online gambling companies are entertaining M&A conversations from foreign competitor brands.

The UK has been tightening its grip on the iGaming market for the last five years, pulling the regulatory belt one notch tighter with each passing year. The result is a mass-market in which it’s increasingly more difficult to turn a profit. Outside companies like Canada’s Stars Group are dangling juicy carrots, and local operators are finding it hard to resist the temptation.