In line with its controversial brand image, Paddy Power's investor relations crew often take the opportunity to pepper their market updates with amusing witticisms. There was no such tomfoolery today though as the betting company got down to the serious business of announcing plans for a merger with Betfair, the online gambling site, which launched just fifteen years ago but now has a market cap of £2.8bn.
The proposed tie-up would create one of the world's largest online gambling companies, with combined revenues of £1.1bn (as of their latest results). It would be 52% owned by Paddy Power's existing shareholders, who would also share a special dividend of €80m (£59m). The deal is subject to due diligence and could also be delayed by the competition authorities.
Shares in both companies shot up by more than double digits this morning on the news, which has surely left the pair's competitors quaking in their boots. For unlike their major rivals Ladbrokes, Betfred, William Hill and Coral, Paddy Power and Betfair are predominantly (and in Betfair's case, entirely) focused on their online operations, which are growing while most of the industry's high street betting shops are struggling to pull in the punters.
That explains why the suitors are absolutely booming - as their latest results, both out today, suggest. In the six months to June, Paddy Power's net revenue was up 25% across the group and 34% online, while operating profits were up 33% to €80m. Betfair's finances aren't looking too shabby either - revenue in the three months to July was up 15% to £135.4m, despite the unhelpful comparison of last year's World Cup, and EDITDA was up 19% to £41m.
'These are two businesses that are performing at a very high calibre and we will have a market-leading position in the UK, Europe, Ireland and Australia,' Breon Corcoran, Betfair's chief executive told the FT. Corcoran, who used to be Paddy Power's COO (it's a small world...), will lead the company once the merger is complete, while current Paddy Power boss Andy McCue would become COO. Both of the brands would continue to exist.
The deal follows the announcement in June that Ladbrokes and Coral are also planning to merge. As the digital sharks circle, MT won't be surprised to see William Hill and Betfred looking for bedfellows of their own.