Shares in gambling group Flutter Entertainment (FLTR) fell 2% to £103.85 after it became the latest listed firm to tap shareholders for cash, raising £812m.

Around 8m shares were placed with institutional investors at a price £100.10 each, representing 5.5% of the issued share capital immediately before the placing, with the price being a 4.7% discount to the closing price on 28 May of £106 per share.

Small retail investors, who weren’t able to take part in the placing, have now seen holdings diluted.


Flutter, which owns the Paddy Power, Betfair and Sportingbet brands, said the placing would help accelerate its growth in the US, invest in its online poker and other gambling offerings, as well as strengthen the balance sheet and help it pay down debt.

The firm took on a sizeable amount of debt in its blockbuster £10bn merger with Stars Group, which was completed earlier this month. The merger makes Flutter the world’s largest gambling group.

Flutter also said in its statement that US media giant Fox Corp, which bought a 4.99% stake in Stars in May last year for $236m, would increase its investment in Flutter as part of the placement but did not say how many shares it was acquiring.

In a second quarter trading update to 17 May, issued alongside the placing announcement, Flutter said group pro-forma revenue grew 10% year-on-year in the second quarter-to-date, after strong performance in its online poker and gaming divisions.

This offset a major decline in its sports revenue, after sporting events worldwide were cancelled as a result of lockdowns due to the coronavirus pandemic.


Shares in Flutter have almost doubled since hitting a low in March, and Numis analyst Richard Stuber thinks this reflects a re-rating of its US division.

Stuber said, ‘With leverage otherwise at 3.7x net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) at year end, management has opportunistically used the [share price] rally to raise £800m (at 27 times price to earnings) to reduce this by 0.9x towards its 1-2x medium term target.’

He added that the enlarged group is ‘trading well’, highlighting the 10% second quarter revenue growth with poker, casino and non-European sports performing particularly well.

But, Stuber said Flutter’s valuation of 17x FY21 EV (Enterprise value) /EBITDA is ‘priced for perfection’ and therefore prefers the risk-reward profile of rival and Ladbrokes Coral owner GVC Holdings (GVC), which is trading at around 8x.


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Issue Date: 29 May 2020