Paddy Power enters Australian betting market

Paddy Power will initially pay us$ 48.5 million to acquire 51% of Sportsbet, satisfied at completion by a cash payment of us$ 45.8 million from the company's existing cash reserves and the issue of 100,000 Paddy Power shares to Sportsbet shareholders.

An additional cash consideration of us$ 10 million will become payable to Sportsbet shareholders in early 2010 if Sportsbet's EBITDA during 2009, before transaction and restructuring costs, exceeds us$ 16.5 million. Sportsbet reported EBITDA of us$ 7.9 million last year on turnover of us$ 878 million. The company has forecast EBITDA of us$ 14.6 million for the year ending June 30th 2009.

Under the terms of the acquisition, if Sportsbet’s EBITDA for any of the years ending June 30th 2010, 2011 or 2012 is less than us$ 11 million, Paddy Power will have the right to claw equity from Sportsbet’s existing shareholders on a proportionate basis to the shortfall in profitability.

In addition, Paddy Power has a call option, exercisable in either 2012 or 2013, to acquire all of the outstanding shares in Sportsbet that it does not own, with the exercise price to be determined based on an EBITDA multiple of 5 to 7 times, depending on the level of EBITDA. 

In the event that Paddy Power elects not to exercise the call option, the minority shareholders in Sportsbet will have the option to acquire Paddy Power’s shareholding.
Under the terms of the deal, Matthew Tripp, Sportsbet’s controlling shareholder will continue in his role as CEO of the company, while Paddy Power has appointed four Directors to the Sportsbet Board.

Commenting on the acquisition, Patrick Kennedy, CEO of Paddy Power, said: "This business is an excellent fit with Paddy Power. Sportsbet has a strong, well run business together with plenty of potential to build on its market position in Australia.

"The acquisition adds a new dimension to our business portfolio to which we can bring trading, risk management and marketing expertise honed in Ireland and the UK to complement Sportsbet’s existing skills and experience."

In operation for over 15 years, Sportsbet also owns 19.98% of domestic rival International All Sports Limited, who yesterday sold its European-facing Canbet business to Yin Khing Investments Limited for us$ 763,130.

Paddy Power's acquisition is conditional on the approvals of the Australian Foreign Investment Review Board and the Northern Territory Racing Commission and is anticipated to complete on or around July1st 2009.

In a separate announcement Thursday, Paddy Power said that amounts staked in the company's non-retail and retail sportsbook had grown by 31% and 1% respectively during the first 19 weeks of the year to May 12th 2009, while gaming and machine gross win had also increased by 9% versus the same period last year.