Moody’s says Covid-19 will spark more gambling mergers

Covid-19 will spark further deals among gambling businesses like the merger of Paddy Power-owner Flutter Entertainment with the Stars Group, credit analysts say.

Flutter shareholders this week backed the Irish group’s proposed merger with Toronto-based Stars to create a global online gambling giant with more than 10 million customers.

Moody's analysts Florent Egonneau and Jeanine Arnold say the wave of consolidation in the industry that prompted the Flutter-Stars merger is likely to accelerate when the coronavirus pandemic abates.

Gambling companies will seek greater scale and more online business to strengthen their businesses, they say.

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“Companies with stronger balance sheets will also be keen to take advantage of depressed valuations to increase their market share through takeovers,” the analysts add.

Betting turnover is severely down since sports organisations cancelled events on which many punters like to wager, including horseracing and football, but Flutter and Stars intend proceeding with their deal.

Moody’s, which assesses businesses’ abilities to repay their debts, rates the Stars Group as B2 stable, which classes it as a high credit risk. The Canadian group’s net debt is around €4 billion.

Merger vote

Stars owns Skybet, Poker Stars and Full Tilt Poker. Its shareholders are due to vote on the Flutter merger later this week.

Moody's does not rate Flutter. The Irish business does not have significant liabilities – its net debt is €270 million. The Clonskeagh, Dublin-headquartered group also owns betting exchange Betfair, Fanduel in the US and Sportsbet in Australia.

The ratings agency says European operators including Germany's Tackle Group, and Cirsa, Codere and Sociedad Limitada in Spain can survive a two-month lockdown, but could face pressure should it drag on.

Operators such as GVC, owner of Ladbrokes, which owns an Irish chain of bookmakers shops and offers online betting here, are seeing more customers switching to poker and casino games in the absence of sports.