PokerStars Parent The Stars Group Acquires Sky Bet in $4.7B Deal

Jigsaw puzzle pieces fitted together

The Stars Group’s acquisition of Sky Betting and Gaming continues the accelerated push by the parent company of PokerStars to become a multi-service operator.

Canada’s The Stars Group (TSG), the parent company of global online-poker market leader PokerStars, announced on Saturday, April 21, its acquisition of Sky Betting and Gaming (SBG). SBG is the parent of growing UK-centric sports-betting brand Sky Bet. The combination cash-and-stock deal is valued at CAD $4.7bn (€3.1bn); $3.6bn (€2.6bn) of that total is cash; the remainder comes from newly-created TSG shares.

The Stars purchase of SBG continues TSG’s concerted push to become a three-faceted service provider in the online-gambling sphere. Once Sky Bet and other recent acquisitions are fully assimilated, TSG may have become a company where sports betting accounts for a larger share of its global revenue than does online poker.

Acquisition increases mobile sector penetration

Sky Bet has recently been a darling of the mobile-gaming space and was viewed as a ripe acquisition target. According to a corporate statement, SBG was the United Kingdom’s fastest-growing established online gaming operator over the past two years. SBG, which includes Sky Vegas, Sky Casino, and other brands in addition to Sky Bet, generates over 80% of its revenue from mobile devices.

The company’s recent growth has been astounding. In the 2017 calendar year, SBG’s unaudited annual revenue was £624m ($872m) and unaudited adjusted EBITDA was £202m ($282m). That represents compounded annual growth rates of approximately 46% and 51%, respectively, over the prior two years.

TSG listed several financial and operational benefits it will receive from the deal, which still requires regulatory approval. Those benefits include:

  • Greater revenue diversification and significantly enhanced exposure to sports betting, the world’s largest and fastest-growing online gaming segment, as the majority of SBG’s revenues are generated by sports betting
  • An increased presence in regulated markets, particularly within the United Kingdom, the world’s largest regulated online gaming market
  • The development of sports betting as a second low-cost customer acquisition channel, complementing The Stars Group’s core poker business and enabling a more effective cross-sell to players across multiple verticals
  • Improved products and technology as a result of the addition of SBG’s innovative casino and sports book offerings and portfolio of popular mobile apps
  • Identified cost synergies of at least $70m (£50m) per year

Pickups accelerate multi-service transitioning

Several years ago, when TSG was known as Amaya, Inc., the company announced its intent to move away from being just a poker-only online service. That led to the launch of BetStars and other “Stars”-branded offerings. Those offerings have been largely successful and promised to make TSG a balanced multi-service operator early next decade.

That complementary shift away from online poker has been accelerated by TSG’s purchase of rival companies. In recent months, TSG acquired Australian sports-betting brands William Hill Australia and CrownBet, and the acquisition of the UK-centered Sky Bet continues that refocus. In fact, if all the new companies had been fully part of The Stars Group’s operational sphere in 2017, the revenue shares by category would have been 37% poker, 34% sportsbook, and 26% casino. Given recent trends, sports betting may become TSG’s primary service category when 2018’s numbers are in.

“The acquisition of Sky Betting & Gaming is a landmark moment in The Stars Group’s history,” said TSG’s chief executive officer, Rafi Ashkenazi. “SBG operates one of the world’s fastest-growing sportsbooks 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. The ability to offer two low-cost acquisition channels of this magnitude provides The Stars Group with great growth potential and will significantly increase our ability to create winning moments for our customers.”

Mr Ashkenazi added: “Following this transaction, The Stars Group will have significantly enhanced scale and a highly-regarded global brand portfolio. As a result, we are well positioned to realize our vision of becoming the world’s favorite iGaming destination.”

Richard Flint, Sky Betting & Gaming’s Chief Executive Officer, offered a similar take: “We are delighted to join forces with The Stars Group. We have had a fantastic last few years and would like to thank CVC and Sky for supporting us in becoming a leading online operator in the UK. This transaction allows us to offer our best-in-class products to a truly global audience. We’re excited about our future together.”

As part of the deal, SBG’s Yorkshire operational base will stay intact and serve as the hub of the new group.

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