Paddy Power’s £6bn merger with the betting exchange Betfair to create the world’s biggest online bookmaker will generate £50m a year in cost savings, the companies have said.
But jobs will go as the new company – to be known as Betfair Paddy Power – strips out duplication in areas like IT and marketing, sources said.
The headquarters of the combined business will be in Dublin but Betfair’s exchange, which allows punters to bet against each other, will be based in London. The group’s primary listing will also be in London, with a secondary listing on the Dublin stock exchange.
The merger will propel the combined business straight into the FTSE 100 index when the deal completes early next year, subject to approval from competition authorities.
It comes as Ladbrokes and Coral work on a merger and Sportingbet owner GVC buys rival Bwin.party for £1bn.
Shore Capital’s Greg Johnson said: “The £50m of synergies are consistent with our prior thoughts given the similarity in magnitude to the Ladbrokes/Coral merger, although we suspect greater opportunities eventually through the latter....
“We remain to be convinced on the rationale of the deal, with synergies less than 1 per cent of the pro forma market cap and the relative strengths of the two businesses.”
The companies will still be run as separate brands after the deal, under which Betfair shareholders will have a 48 per cent stake and Paddy Power investors will get 52 per cent.
Around 80 per cent of the new group’s revenues will come from online operations.
Gary McGann, Paddy Power’s chairman, said: “The merger of Paddy Power and Betfair will create a company of world-class capability and people who will deliver substantial upfront synergies and a platform for very exciting business expansion.”
Gerald Corbett, the chairman of Betfair, added that the deal makes “huge strategic sense by bringing together two industry-leading and successful businesses and providing enlarged scale, capability and distinctive, complementary brands”.
