Gambling operator Flutter Entertainment has scrapped cash dividend plans to keep finances at hand for its £10-plus-billion merger with Canadian gaming and sports betting powerhouse The Stars Group.
Flutter said Friday that as a result from the unfolding Covid-19 crisis, the combined gambling group will have a higher debt burden that originally expected.
However, Peter Jackson, CEO of the Irish gambling group, said that he is now more convinced about the mega-merger than ever as the deal is anticipated to create a powerhouse with a more diverse portfolio of brands.
The combined entity was originally expected to have a debt burden of 3.5x its earnings minus synergies. Flutter warned today that the ratio is likely to be higher due to the uncertainties stemming from the coronavirus outbreak and the impact these have on global economy.
The gambling operator said that it has remained committed to cutting the debt leverage to between 1x and 2x its earnings “over the medium term.”
Scrapping Cash Dividend
Flutter announced today that it has decided not to move forward with its planned €112.7 million final 2019 cash dividend and has also dropped plans to pay a dividend to its shareholders this year ahead of the closure of its merger with The Stars.
Of the final 2019 cash dividend payout, Flutter said that it would award shares to its investors instead.
Flutter said today that it believes the combined group will have robust future “given its strong cash generation in conjunction with expected cost, revenue and financing synergies.” Yet, the company admitted that the disruptions caused by the coronavirus crisis will “impact the financial profile of the combined group” in 2020.
The Irish gambling group announced earlier this month that it expected its full-year EBITDA to slump by £90-£100 million due to the cancellation/postponement of major sporting events around the world to help curb the spread of Covid-19.
Flutter’s estimate did not include the potential closure of its betting shops around the UK and Ireland and the cancellation of UK, Irish, and Australian horse racing fixtures as well as the postponement of the Olympic Games in Tokyo.
Existing Debt Refinancing
Earlier this month, Flutter secured a new £1.3 billion debt arrangement to refinance some of its existing debt as well as of The Stars when the deal closes.
The gambling group said today that it will look to refinance the remaining debt in due course and that they “remain confident that this will drive material financing synergies for the combined group over time.”
The multi-billion mega-merger, which was announced last fall, is subject to regulatory and shareholder approval. Both Flutter and The Stars Group shareholders are set to cast their votes on the deal on April 21.
The enlarged gambling group’s portfolio will include some of the world’s largest gaming and sports betting brands, with some of those being PokerStars, Sky Betting & Gaming, Paddy Power, Betfair, Sportsbet, and FanDuel.