Thanks To New Acquisition, Blue Skies Are Smiling At Stars Group

For the second time in four years, PokerStars was involved in a major acquisition that sent shockwaves through the gaming industry.

In 2014, it was Amaya’s $4.9 billion purchase of the online poker giant that stunned the industry. And on Saturday morning, The Stars Group (TSG) stunned everyone again. It announced it was acquiring Sky Betting Group (SBG) for the princely sum of $4.7 billion.

TSG Chief Executive Officer Rafi Ashkenazi elaborated on the sale in a press release:

“The acquisition of Sky Betting & Gaming is a landmark moment in The Stars Group’s history. 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.”

“We are delighted to join forces with The Stars Group,” said Richard Flint, Sky Betting & Gaming’s CEO. “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.”

If the sale is approved, the new company will be the largest publicly traded online gaming company in the world.

It also accelerates the path PokerStars has been traveling since 2014.

PokerStars’ emphasis on poker continues to wane

When Amaya purchased PokerStars, virtually all of the company’s revenues came from poker.

Since the acquisition, TSG has diversified its portfolio well. The company added online casino and sports betting, as well as some other verticals like daily fantasy sports.

Poker players have been lamenting this change for years. They loudly criticize the metamorphosis of PokerStars from one of the last remaining poker-only operators to a comprehensive online gaming company, bent on cross-selling players.

Even though PokerStars is increasing poker revenue, the company has become less reliant on poker.

Even though the new, multi-channel TSG has made significant gains on the casino side, it has struggled to gain a foothold in the sports betting market, which helps explain the SBG acquisition.

Looking at TSG numbers

In 2017, TSG reported the following revenue breakdowns:

• 67 percent from poker. Poker accounted for 73 percent of revenue in 2016.
• 29 percent from casino and sports. Casino and sports accounted for 23 percent of revenue in 2016.

The purchase of SBG further changes that dynamic.

According to Ashkenazi, the projected share of each vertical post-acquisition will be:

37 percent from poker
34 percent from sports betting
26 percent from casino

US opportunities abound for TSG

As was the case with the Amaya purchase of PokerStars, the US was a factor in the acquisition of SBG.

Included in a slideshow that accompanied a conference call on Monday, TSG cited opportunities in the US as one of the reasons for the acquisition.

In a section called, “Acquisition Rationale: Global Growth Strategies for SBG” the slide reads:

“Capitalize on potential US sportsbook opportunity by leveraging the combination of TSG’s brand strength, customer database and poker leadership with SBG’s expertise in sportsbook and media partnership.”

PokerStars is already active in the New Jersey online gaming market, and is expected to be involved when Pennsylvania online gaming goes live in late 2018/early 2019.

Of particular interest to the recent acquisition of SBG, both of those states have also taken steps to legalize sports betting, should the Supreme Court strike down PASPA.

Further, TSG now has a proven, high-end sports betting product to shop around to potential partners in other states.

What will be interesting to see is what sports betting brand the company chooses to use in these US markets.

During the call, Ashkenazi said that both Sky Bet and the company’s existing BetStars brand will be used.

“Wherever we can operate the Sky Bet brand, we will,” Ashkenazi said. “Wherever we can’t, we will use the BetStars brand powered by Sky Bet.”

Ashkenazi intimated that the reason for the two brands was that different jurisdictions allow different things. However, there’s a good chance BetStars is used in the US for the simple reason that the Sky Betting brand is largely unknown in the US.

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