Online gambling company Betfair and Irish rival Paddy Power say they've reached an agreement in principle on a 5 billion pound ($7.85 billion) merger. As Grace Pascoe reports it marks the latest in a string of deals in the sector.
It's only an agreement in principle but the odds are Betfair and Paddy Power will join forces. The British and Irish bookies are planning a 5 billion pound merger. They say it will make them one of the world's biggest betting and gaming groups with revenue of over 1.1 billion pounds. It will also give them 16 percent of a UK market which is having to adapt to tighter regulation and higher tax bills. Chris Beauchamp is from IG. (SOUNDBITE) (English) IG, MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "These moves to create bigger conglomerates if you like, in terms of betting will mean they can cut costs, focus on bigger initiatives and crucially expand into new markets. I think investors are prepared to take the hit from the cost control that we will see from these mergers if it means that the longer term they become more competitive." Discussions are ongoing to finalise the all-share merger - which follows others in the sector. Ladbrokes and Gala Coral struck a similar deal last month, creating a 2.3 billion pound group. And GVC Holdings is bidding for Bwin.party Digital Entertainment (SOUNDBITE) (English) IG, MARKET ANALYST, CHRIS BEAUCHAMP, SAYING: "It is almost a sort of pan-sector move really, we are seeing consolidation in a number of sectors at the moment as people realize that to compete in a broader global market place you have to get bigger. And the betting industry is just the latest symptom of that." If the deal goes ahead Paddy Power shareholders will own 52 percent of the group. With Betfair investors owning the rest. Both firms saw their shares rise at least 17 percent on the news. And Paddy Power shareholders may also hit the jackpot - they'll get a special dividend of 80 million euros.