The Stars Group Is Now The Largest Public Online Gaming Company After Completing Sky Betting Deal

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The Stars Group has publicly announced that it has completed its acquisition of Sky Betting and Gaming (SBG).

The deal press release is available here

The deal makes The Stars Group the largest publicly quoted online gaming company in the world.

Rafi Ashkenazi, The Stars Group chief executive, was obviously triumphant in the announcement:

“This transaction creates the world’s largest publicly listed online gaming company and joins two iconic brand portfolios with powerful technology platforms and teams. This substantial scale also positions The Stars Group to both secure and expand upon its global footprint.”

The end of a search for a spouse

For at least the last 3 decades the Stars Group was looking for a partner that could help it achieve the scale and product balance that its strategy envisioned.

Right from the moment Amaya purchased PokerStars it was evident that there was tremendous value to be gained from increasing the product range beyond online poker.

Either as target or acquirer, the Group has explored joining with 888 and William Hill and certainly other people whose interest did not make it to the purpose of a public declaration.

Meanwhile, Stars has acquired smaller businesses , such as William Hill Australia and a controlling interest in CrownBet, also in the Australian industry.

With this deal, Askenazi has finally put the Stars Group at the position to which it has aspired for so long.

The price rationale and benefits are summarized as:

Improving earnings diversity:”creating a balanced spread across casino, poker and sportsbook with a broad geographic reach.” Increased presence in markets that are regulated:”to approximately 75% of combined revenues.” Developing sports gambling as a second client acquisition station:”complementing The Stars Group’s core offerings and creating an opportunity to cross-sell players across multiple verticals.” Enhanced technology and products:”through the inclusion of SBG’s innovative sportsbook and casino offerings and portfolio of popular mobile programs.” Acquisition complete now time to deliver

Of course, now that the purchase is finished, Ashkenazi’s glories will quickly fade into the past, and he’ll be measured on his performance in executing the merger and expansion of the new group.

Investors have bid Stars shares up to all-time highs in their enthusiasm for the deal, they will now expect to see Ashkenazi deliver.

The purchase price was a hefty $4.7 billion, a multiple of”12.8x unaudited adjusted LTM EBITDA, including anticipated run-rate cost synergies.”

This suggests cost synergies of roughly $70 million per annum, a stretch goal if ever there was one.

One factor that will help Ashkenazi is that the US Supreme Court has made sports betting businesses more valuable following its ruling on PASPA which allows US states to legalize sports gambling.

SBG’s biggest asset at the moment may well be its own sports gambling platform and its strength in the UK, one of the largest sports betting markets in the world.

Askenazi commented:

“This acquisition represents a critical moment in The Stars Group’s evolution. SBG’s mobile-focused sportsbook pairs nicely with our industry-leading poker offering to create two premier customer acquisition stations. We believe this combination along with our combined online casino offerings positions The Stars Group for continuing growth in the evolving online gaming industry.”

Stars increased the cash to purchase Sky in two months

Since the deal was first announced on April 21 this year, Stars was active in increasing the money it had to make the deal go ahead.

Today’s press release announcing the completion of the acquisition explains that funding was:

“…comprised of a combination of cash and approximately 37.9 million newly-issued common shares of The Stars Group. The cash consideration of the acquisition was financed through cash on the balance sheet, proceeds from The Stars Group’s recent equity offering and newly issued debt consisting of:

$100 million from its revolving credit facility, which was increased to $700 million, priced at LIBOR plus 3.25% and maturing in five years;
$4,567 million equivalent in fresh first lien term loans, including a U.S. dollar denominated tranche of $3,575 million priced at LIBOR plus 3.50% and a Euro denominated tranche of $850 million priced at Euribor plus 3.75%, and each with a 0% floor and maturing in seven years; and $1,000 million at 7.0% unsecured senior notes due July 2026.”

The finance for a $4.7 billion deal doesn’t come simply.

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