Owners of PokerStars, Stars Group acquires UK based Sky Betting and Gaming from CVC for $4.7 billion to position itself for potential U.S. market opening. The acquisition turns the online poker giant into a major sports betting player with a strong foothold in Europe to U.S. if the market fully opens.
The cash and stock deal was made with CVC Capital Partners and Sky Plc. will also help Stars Group to win a significant foothold in the U.K which is also the largest regulated gaming market. Sky Betting and Gaming had also recently expanded to Italy and Germany.
The acquisition comes before an upcoming Supreme Court decision in the U.S. allows sports betting in more states, which would be highly beneficial for Stars Group, according to Simon Holliday, founder of the research firm H2 Gambling Capital.
Holliday further wrote in an email:
“The US sportsbetting Supreme Court case is obviously a big part of the potential upside, with Star’s old database, SBG’s strengths and their track record solely in the U.K. Even without the U.S., SBG is just starting to launch in other regulated markets.”
Up to now betting in sports in some form is legal in only four U.S states. However, Supreme Court is weighing New Jersey’s attempt to have a 1992 law banning sports betting beyond those states struck down as unconstitutional and if the court agrees it could trigger a wave of states legalizing betting on football, basketball and other sports.
According to Simon Davies, an analyst at Canaccord Genuity in London:
“The strategic fit is very good, the valuation is reasonable for a fast-growing company.”
As Stars Group is pushing away from its reliance on poker industry to other industry, the deal additionally provides Stars Group with a huge range of potential new customers for its poker offerings. Sky Betting and Gaming’s strengths include technology and marketing and this helped it to climb from eight biggest operator in the U.K in 2011 to third biggest last year.
According to the agreement, Stars Group will pay $3.6 billion and approximately 37.9 million newly issues common shares based on the April 20 closing price. Star Group will obtain debt financing of approximately $6.9 billion including $5.1 billion of first lien term loans, $1.4 billion of senior unsecured notes and a $400 million revolving credit facility.
Proceeds will be used for the cash portion of the deal, as well as to refinance the company’s existing first lien term loan and repay SBG’s outstanding debt, it said.
According to Rafael Ashkenazi, CEO of Stars Group:
“Sky Betting & Gaming’s premier sports betting product is the ideal complement to our industry-leading poker platform.”
The financial advisors to Stars Group were Morgan Stanley and PJT Partners Inc. and the debt financing were provided by Deutsche Bank AG, Goldman Sachs Group Inc., Macquarie Group Ltd. and Morgan Stanley.
About Stars Group
Headquartered in Toronto, Canada, Stars Group Inc. is an online gaming operator and owns gaming and related consumer business and brands. Serving customers worldwide, Stars Group portfolio comprises of online poker games and tournaments, live competitions, and programming created for television and online audiences
About Sky Betting and Gaming
Founded in 2001, Sky Betting and Gaming provides online sports betting services. Headquartered in the UK, Sky Betting and Gaming offers online poker, bingo and casino games.