Enlarged Flutter and Stars group to grow ‘at least’ as fast as market – Moody’s

Analysts believe Paddy Power owner Flutter Entertainment will grow "at least" as fast as the market following its merger with Canadian rival The Stars Group.

The pair formally merged this week to create an Irish-headquartered gambling giant with revenues of close to €5 billion a year.

Florent Egonneau and Jeanine Arnold, analysts with ratings agency Moody's, predict that the newly-enlarged Flutter "will continue to grow at least in line with the online market" in a note weighing its creditworthiness.

They calculate that savings resulting from the merger will offset any extra regulatory costs faced by the group.

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Flutter said the merger would save the business €160 million when it announced details of the proposed transaction in October.

“In the medium term, the company’s growth and US market position should help strengthen the company’s business profile,” the analysts say. However, they add that it will take a couple of years before the business generates earnings from the US, where the market is still in the process of opening up.

Their assessment is based on Flutter not borrowing money to pay for large acquisitions and continuing to cut debt.

Rating

Moody’s rates Flutter’s debt as Ba1 with a stable outlook, which implies there is some risk that it will default on its liabilities.

The rating refers only to Flutter’s pre-merger liabilities, which include a £950 million (€1 billion) term loan and revolving credit of £450 million.

The Stars Group has net debt of about €4 billion but Moody’s understands that there will be a full merger on credit terms once the Canadian company refinances part of this.

Flutter owns Paddy Power, betting exchange Betfair, Fanduel in the US, Sportsbet in Australia and several other businesses. The merger added Skybet, Poker Stars and Full Tilt Poker along with other online betting operations.

Sport cancelled

Sport in the Republic, UK, US and other jurisdictions is cancelled as a result of widespread Covid-19 lockdowns, limiting the events on which Flutter’s customers can bet.

Horse racing, a mainstay of many of Flutter's businesses, continues behind closed doors in Australia, Hong Kong, Japan and parts of the US. It restarts in France on the same terms next week while there are hopes that it can proceed in Britain by the end of month.

The picture is less clear in this country, where Horseracing Ireland governs the sport in all 32 counties. Reports this week indicated that it may restart in June.