TIDMTSGI
Stars Group Inc (The)
23 April 2018
The Stars Group to Acquire Sky Betting & Gaming For $4.7
Billion
Landmark Transaction Combines Two Leaders in Online Gaming
TORONTO - April 21, 2018 - The Stars Group Inc. (NASDAQ: TSG;
TSX: TSGI) ("The Stars Group" or "the Company") announced today
that it has agreed to acquire Sky Betting & Gaming ("SBG") from
CVC Capital Partners ("CVC") and Sky plc (LSE: SKY) ("Sky") in a
cash and stock transaction valued at $4.7 billion. This combination
will result in the world's largest publicly listed online gaming
company.
"The acquisition of Sky Betting & Gaming is a landmark
moment in The Stars Group's history," stated Rafi Ashkenazi, the
Company's Chief Executive Officer. "SBG operates one of the world's
fastest growing sportsbooks and is one of the United Kingdom's
leading gaming providers. SBG's premier sports betting product is
the ideal complement to our industry-leading poker platform. The
ability to offer two low-cost acquisition channels of this
magnitude provides The Stars Group with great growth potential and
will significantly increase our ability to create winning moments
for our customers."
Mr. Ashkenazi concluded, "Following this transaction, The Stars
Group will have significantly enhanced scale and a highly-regarded
global brand portfolio. As a result, we are well positioned to
realize our vision of becoming the world's favorite iGaming
destination."
This acquisition will provide The Stars Group with multiple
operational and financial benefits, including:
-- Greater revenue diversification and significantly enhanced
exposure to sports betting, the world's largest and fastest
growing online gaming segment, as the majority of SBG's
revenues are generated by sports betting.
-- An increased presence in regulated markets, particularly
within the United Kingdom, the world's largest regulated
online gaming market.
-- The development of sports betting as a second low-cost
customer acquisition channel, complementing The Stars
Group's core poker business and enabling more effective
cross-sell to players across multiple verticals.
-- Improved products and technology as a result of the addition
of SBG's innovative casino and sports book offerings,
and portfolio of popular mobile apps.
-- Identified cost synergies of at least $70 million per
year.
SBG is currently home to the United Kingdom's largest active
online player base and, with over 80% of revenues generated from
mobile devices, is a leading mobile betting and gaming operator. In
partnership with Sky, Europe's leading sports broadcaster and media
company, SBG has developed some of online gaming's most well-known
brands, most notably Sky Bet, Sky Vegas and Sky Casino. SBG's
unaudited annual revenue was GBP624 million and unaudited adjusted
EBITDA(1) was GBP202 million in the 12-month period ended December
31, 2017, representing compounded annual growth rates of
approximately 46% and 51%, respectively, over the prior two years.
SBG was the United Kingdom's fastest growing established online
gaming operator over this period. Following the acquisition, The
Stars Group's leadership will draw from two well-respected and
highly experienced teams and SBG's Yorkshire base will operate as a
major hub of the enlarged group.
"We are delighted to join forces with The Stars Group," said
Richard Flint, Sky Betting & Gaming's Chief Executive Officer.
"We have had a fantastic last few years and would like to thank CVC
and Sky for supporting us in becoming a leading online operator in
the UK. This transaction allows us to offer our best-in-class
products to a truly global audience. We're excited about our future
together."
Pev Hooper, Partner at CVC, said, "Richard and his team have
done a fantastic job building Sky Betting & Gaming into one of
the UK's largest and fastest growing operators. We have thoroughly
enjoyed working closely with the team and our partners at Sky. This
combination with The Stars Group opens a new and exciting chapter
for SBG to accelerate its international growth, and we look forward
to continuing the journey as a shareholder in the combined
group."
Jeremy Darroch, Group Chief Executive Officer, Sky, said, "This
agreement is an important milestone in SBG's growth story and a
testament to what we and the whole SBG team have achieved. We look
forward to the next chapter and continuing our long-term
partnership with SBG as part of The Stars Group."
The Stars Group's announced acquisitions since the beginning of
2018 will significantly diversify the Company's revenue base. On a
pro forma basis to include the anticipated acquisitions of SBG,
CrownBet and William Hill Australia, the Company's 2017 revenue mix
by product would have been 37% poker, 34% sportsbook and 26%
casino(2) . On the same basis, 75% of The Stars Group's 2017
revenues would have been generated within locally regulated or
taxed markets.
Transaction Details
Under the terms of the acquisition agreement and based on the
closing price of The Stars Group's common stock on April 20, 2018,
the transaction has an enterprise value of approximately $4.7
billion, of which $3.6 billion is payable in cash and the remainder
is payable in approximately 37.9 million newly-issued common
shares. The new shares will represent approximately 20% of The
Stars Group's issued and outstanding common shares giving effect to
the transaction and the anticipated acquisitions of CrownBet and
William Hill Australia. Substantially all of the common shares
issued to the sellers will be subject to certain transfer
restrictions for a minimum of six months, subject to customary
exceptions. The transaction values SBG at a multiple of 12.8x
unaudited adjusted LTM EBITDA, including expected run-rate cost
synergies(3) . The Stars Group estimates that the transaction will
be neutral to adjusted earnings per share on a diluted basis in the
first full year following its completion and have a positive impact
thereafter.
The Stars Group has obtained fully committed debt financing of
approximately $6.9 billion including $5.1 billion of first lien
term loans, $1.4 billion of senior unsecured notes and a $400
million revolving credit facility. The funded proceeds of $6.5
billion will be used for the cash portion of the transaction
consideration, refinancing the Company's existing first lien term
loan and repaying SBG's outstanding debt.
The Stars Group's Board of Directors unanimously approved the
transaction. The Stars Group currently anticipates completing the
transaction in the third quarter of 2018. Completion of the
transaction is conditional upon obtaining customary approvals from
the Toronto Stock Exchange, Nasdaq, and certain gaming and other
regulatory authorities, as well as the completion of other
customary closing conditions. Approval of the transaction by The
Stars Group's shareholders will not be a requirement or condition
to close.
The Stars Group will retain SBG's rights under certain
commercial, licensing and marketing arrangements with Sky. Certain
of these arrangements currently cover the United Kingdom, Italy,
and Germany, as applicable, and include a framework to cover
additional mutually agreed upon regulated geographies in the
future.
Morgan Stanley & Co. LLC and PJT Partners LP acted as
financial advisors to The Stars Group and its Board of Directors,
and Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC,
Macquarie Capital (USA) Inc. and Morgan Stanley & Co. LLC
provided the committed debt financing. PJT Partners LP also advised
The Stars Group on the debt financing associated with the
transaction. Gibson, Dunn & Crutcher LLP and Blake, Cassels
& Graydon LLP acted as co-counsel to The Stars Group in
connection with the transaction. Paul, Weiss, Rifkind, Wharton
& Garrison LLP acted as legal advisor to The Stars Group on the
debt financing associated with the transaction.
Unless otherwise indicated, all references in this news release
to "$" are to U.S. dollars and "GBP" are to Great Britain pounds
sterling.
Investor Conference Call
An investor conference call will take place at approximately
8:30 am ET, Monday, April 23, 2018.
To access via tele-conference, please dial +1 877-407-6169 or +1
201-689-8797 ten minutes prior to the scheduled start of the call.
The Conference ID number is 13679251.
The playback will be made available two hours after the event at
+1 844-512-2921 or +1 412-317-6671. The Conference ID number is
13679193.
To access the webcast please use the following link:
http://public.viavid.com/index.php?id=129505
___________________
(1) Adjusted EBITDA is net earnings before financial expenses,
income taxes expense (recovery), depreciation and amortization,
restructuring and certain other items.
(2) Excludes other revenues.
(3) Adjusted EBITDA of GBP213 million in the 12-month period
ended March 31, 2018, and run-rate cost synergies of $70m.
About The Stars Group
The Stars Group is a leading provider of technology-based
products and services in the global gaming and interactive
entertainment industries. The Stars Group directly or indirectly,
including through its Stars Interactive Group division, owns gaming
and related consumer businesses and brands, such as PokerStars,
PokerStars Casino, BetStars, Full Tilt, and the PokerStars Players
No Limit Hold'em Championship, European Poker Tour, PokerStars
Caribbean Adventure, Latin American Poker Tour, Asia Pacific Poker
Tour, PokerStars Festival and PokerStars MEGASTACK live poker tour
and event brands. These brands together have millions of registered
customers globally and collectively form the largest poker business
in the world, comprising online poker games and tournaments,
sponsored live poker competitions, marketing arrangements for
branded poker rooms in popular casinos in major cities around the
world, and poker programming and content created for television and
online audiences. The Stars Group, through certain of these and
other brands, also offers non-poker gaming products, including
casino and sportsbook. The Stars Group, through certain of its
subsidiaries, is licensed or approved to offer, or offers under
third party licenses or approvals, its products and services in
various jurisdictions throughout the world, including in Europe,
both within and outside of the European Union, Australia, the
Americas and elsewhere. In particular, PokerStars is the world's
most licensed online gaming brand, holding licenses or related
operating approvals in 17 jurisdictions.
About CVC Capital Partners
CVC Capital Partners is a leading private equity and investment
advisory firm. Founded in 1981, CVC today has a network of 23
offices and approximately 400 employees throughout Europe, Asia and
the U.S. To date, CVC has secured commitments of over $107 billion
from some of the world's leading institutional investors across its
private equity and credit strategies. In total, CVC currently
manages over $65 billion of assets. Today, funds managed or advised
by CVC are invested in 50 companies worldwide, employing c.310,000
people in numerous countries. Together, these companies have
combined annual sales of over $70 billion.
Cautionary Note Regarding Forward Looking Statements
This news release contains forward-looking statements and
information within the meaning of the Private Securities Litigation
Reform Act of 1995 and applicable securities laws, including,
without limitation, as it relates to The Stars Group's acquisition
of Sky Betting & Gaming as referenced herein, as well as
certain expectations with respect to the same and certain future
operational and growth plans and strategies. Forward-looking
statements and information can, but may not always, be identified
by the use of words such as "anticipate", "plan", "continue",
"estimate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "would",
"should", "believe", "objective", "ongoing", "imply", "assumes",
"goal", "likely" and similar references to future periods or the
negatives of these words and expressions. These statements and
information, other than statements of historical fact, are based on
management's current expectations and are subject to a number of
risks, uncertainties, and assumptions, including market and
economic conditions, business prospects or opportunities, future
plans and strategies, projections, technological developments,
anticipated events and trends and regulatory changes that affect
The Stars Group, its subsidiaries, and its and their customers and
industries. Although The Stars Group and management believe the
expectations reflected in such forward-looking statements and
information are reasonable and are based on reasonable assumptions
and estimates as of the date hereof, there can be no assurance that
these assumptions or estimates are accurate or that any of these
expectations will prove accurate. Forward-looking statements and
information are inherently subject to significant business,
regulatory, economic and competitive risks, uncertainties and
contingencies that could cause actual events to differ materially
from those expressed or implied in such statements. Specific risks
and uncertainties relating to the transaction described in this
news release include, but are not limited to: (i) the completion of
the proposed transaction may not occur on the anticipated terms and
timing or at all, (ii) the required regulatory approvals are not
obtained, or that in order to obtain such regulatory approvals,
conditions are imposed that adversely affect the anticipated
benefits from the proposed transaction or cause the parties to
abandon the proposed transaction, (iii) the risk that a condition
to closing of the transaction may not be satisfied, (iv) potential
litigation relating to the proposed transaction that could be
instituted against the parties or their respective directors, (vi)
potential adverse reactions or changes to business relationships
resulting from the announcement or completion of the transactions,
(vii) risks associated with third party contracts containing
consent and/or other provisions that may be triggered by the
proposed transaction, (viii) negative effects of the announcement
or the consummation of the transaction on the market price of The
Stars Group's common stock, (ix) risks relating to the value of the
The Stars Group shares to be issued in the transaction and
uncertainty as to the long-term value of The Stars Group's common
stock, (x) the potential impact of unforeseen liabilities, future
capital expenditures, revenues, expenses, earnings, synergies,
economic performance, indebtedness, financial condition and losses
on the future prospects, business and management strategies for the
management, expansion and growth of The Stars Group's operations
after the consummation of the transaction and on the other
conditions to the completion of the transaction, (xi) the risks and
costs associated with, and the ability of The Stars Group to,
integrate the businesses successfully and to achieve anticipated
synergies, (xii) the risk that disruptions from the proposed
transaction will harm the parties' businesses, including current
plans and operations, (xiii) the ability of the parties to retain
and hire key personnel, (xiv) adverse legal and regulatory
developments or determinations or adverse changes in, or
interpretations of, applicable laws, rules or regulations,
including tax laws, rules and regulations, that could delay or
prevent completion of the proposed transaction or cause the terms
of the proposed transaction to be modified, (xv) the impact of the
heavily regulated industry in which the parties operate and carry
on business, (xvi) risks related to tax matters, and (xvii)
management's response to any of the aforementioned factors. Other
applicable risks and uncertainties include, but are not limited to,
those identified in The Stars Group's annual information form for
the year ended December 31, 2017, including under the heading "Risk
Factors and Uncertainties", and in management's discussion and
analysis for the year ended December 31, 2017, including under the
headings "Risk Factors and Uncertainties", "Limitations of Key
Metrics and Other Data" and "Key Metrics", each available on SEDAR
at www.sedar.com, EDGAR at www.sec.gov and The Stars Group's
website at www.starsgroup.com, and in other filings that The Stars
Group has made and may make with applicable securities authorities
in the future. Investors are cautioned not to put undue reliance on
forward-looking statements or information. Any forward-looking
statement or information speaks only as of the date hereof, and The
Stars Group undertakes no obligation to correct or update any
forward-looking statement, whether as a result of new information,
future events or otherwise, except as required by applicable
law.
For investor relations, please contact:
Tim Foran
Tel: +1 416-986-8515
ir@starsgroup.com
For media inquiries, please contact:
Eric Hollreiser
Press@starsgroup.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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