UK Regulator Approves The Stars Group’s Takeover of Sky Bet

Online poker powerhouse The Stars Group will now be able to proceed with its $4.7 billion (£3.6bn) acquisition of Sky Betting and Gaming because the purchase has been cleared by the United Kingdom’s Competition & Markets Authority (CMA). After merger, this corporation will be the largest publicly listed gambling company in the world.

Reasons for the Deal

The Stars Group was already a behemoth in the online gaming sphere with $1.3 billion in revenue in 2017. This Canadian gaming company’s brands include PokerStars, Full Tilt and BetStars. However, the distribution of this revenue was a bit lopsided because poker represented a full $877 million of it. Poker tends to be a lower-margin product than online betting and casino operations, so it’s natural that execs at The Stars Group want to expand into other forms of gambling.

Sky Betting and Gaming is much smaller, with revenues in the ballpark of $400 million per year, but this money comes mainly from sports betting with smaller contributions from casino gaming and poker. This British-based gambling company runs Sky Bet, Sky Vegas, Sky Poker, Sky Casino and a few other brands. In a press release from July, the Stars Group stated that the acquisition “dramatically improves The Stars Group’s revenue diversity, creating a balanced spread across poker, casino and sportsbook with a broad geographic reach.”

Other benefits of bringing Sky Betting and Gaming under The Stars Group’s umbrella include access to Sky’s superb mobile gambling apps and the fact that the deal would boost the fraction of The Stars Group’s revenue coming from regulated markets to 75 percent.

Financial Details

The agreement for The Stars Group to take over Sky Betting and Gaming was announced in April. The Stars Group will pay major Sky shareholders GVC Capital Partners and Sky plc approximately $4.7 billion, of which $3.6 billion will be in cash, and the remainder in the form of newly created shares of The Stars Group.

The funds for the cash portion of the acquisition price came from debt financing. This included loans, unsecured notes and the use of a revolving credit arrangement.

Executive Shakeup

While announcing that their deal was given the go-ahead by the CMA, both corporations took the time to reveal several shake-ups in their personnel.

Longtime Sky Betting and Gaming CEO Richard Flint is being moved to an executive chairmanship while the CEO role will be filled by Ian Proctor, formerly CFO of the company. Conor Grant, formerly director of gaming brands, will become chief operating officer. Both Ian Proctor and Richard Flint will report to The Stars Group’s CEO, Rafi Ashkenazi, who commenting upon the new arrangement, expressed his optimism that the new senior management structure and appointments will better position the company to deliver on its strategy of becoming the “world’s favorite online gaming destination.” For his part, Richard Flint added:

“I am confident that the new management structure, which includes an operational board for SBG, will allow us to maintain our unique culture that has delivered success over the years and continue delivering market share gains in the UK online betting and gaming market, building on our position as the UK’s most popular online betting brand.”

Meanwhile, Sky Betting’s chief technology officer Andy Burton will move over to The Stars Group as the vice president for its global sports platform. Additionally, Sky’s director of corporate development Vaughan Lewis will become The Stars Group’s director of investment and corporate communications.

Regulatory Hurdles Overcome

The viability of the Stars Group/Sky Betting merger had been in doubt because in July, the CMA ordered the two entities to remain separate for the time being. Not only did they have to halt the integration of their distinct brands, but both corporations were prevented from making changes to their management or corporate structures, and they were not permitted to reveal their business secrets or other proprietary information to each other. What’s more, The Stars Group and Sky Betting and Gaming had to file regular reports on their compliance with these directives.

What the CMA was concerned with was a possible reduction in healthy competition in the industry. With the user base of Sky added to the preexisting customer pool at The Stars Group, as the argument goes, the new company would possess basically a monopolistic position in the marketplace. It could then use its dominance to squeeze rivals out of the game entirely.

While it’s true that The Stars Group owns PokerStars, the largest online poker site in the world, its presence in the internet casino and sports betting industries is much weaker. In any case, Sky Poker is such a small operation that the addition of its few players to the PokerStars room would have a negligible effect on the overall fortunes of The Stars Group’s poker division.

All of this is in the rear-view mirror now, though, because the CMA has approved both parties to proceed with their plans. According to info received by iGamingBusiness.com, this was a “clean approval” by the CMA, having found “no concerns” that would warrant further regulatory delay.

Looking Forward

Ever since the acquisition of PokerStars by The Stars Group (then called Amaya, Inc.) in June 2014, this gambling company has sought to expand and broaden its gaming operations. Some of the steps it has taken in this direction have included the deployment of innovative poker variants, like PowerUp and Unfold tables, and the addition of casino games to its poker room. Now that The Stars Group will be able to bring the diversified gaming portfolio of Sky to its customers, it might finally be able to achieve the balanced revenue streams it has long sought.