Paddy Power Betfair’s biggest backer increases stake

Paddy Power Betfair's biggest investor, Capital Markets Group, paid more than €110 million to boost its stake in the gambling giant to more than 13 per cent.

The US fund confirmed that on Wednesday it bought just over 11.09 million of the Irish bookie’s shares, worth €110.6 million at that day’s closing price of €99.70.

The purchase brought Capital Markets’ stake to 84.2 million shares, or 13.175 per cent of the company, consolidating its position as Paddy Power Betfair’s biggest backer. That stake was worth €813 million at Friday’s closing price of €95.67.

Its holding is well ahead of the next biggest, Toronto-based Sun Life Finance’s 9 per cent stake and third-placed Marathon Asset Management’s 7.7 per cent.

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Details of the Capital Markets transaction were published on Friday. It bought the shares on Wednesday and notified the company the following day.

As its purchase meant Capital Markets’ interest in Paddy Power Betfair passed the 13 per cent mark, the investor was obliged to inform the company of the move and the details had to be published.

Capital Markets Group is the parent of Capital Research and Management Company, a well-known US fund manager that invests capital on behalf of client businesses.

Europacific Growth Fund, which Capital Markets owns and manages, holds 6.7 million of the investment group’s Paddy Power Betfair shares, but the parent has the voting rights attached to these equities. Europacific disclosed details of its stake in January.

Bumper Cheltenham

Capital Markets gave no reason for its purchase, but it bought the shares after Paddy Power Betfair said that revenues and profits were up in the first three months of the year on the back of a winning Cheltenham jumps racing festival in March.

The company said it made a profit on 19 of the 28 races held over the four-day festival, compared with just 11 last year.

The group’s operating profit more than doubled to £91 million from £42 million, while revenues swelled by 23 per cent to £416 million. Sports revenues, where it would have felt the benefit of the Cheltenham results, rose 28 per cent to £326 million.

Paddy Power Betfair’s customers bet a total of £2.7 billion with the company in the three months ended March 31st, 18 per cent more than during the same period last year.

Its March windfall helped to offset subsequent football and racing results during the following month that favoured the bookmaker’s customers. The company said that gross win margins – which measure the actual amount that it wins from customers – were weak during April.