By Richard Gluyas
IRISH bookmaker Paddy Power has paid $132.6 million for the shares he does not already own in online betting agency Sportsbet.
The deal, in which Paddy Power will acquire an additional 39 per cent, caps off a remarkable success story for 36-year-old founder Matthew Tripp, who will reportedly reap about $40m from the deal.
The deal values Darwin-based Sportsbet, a company that Tripp bought out of bankruptcy in 2005 for $250,000, at $338m.
Paddy Power, listed on the Dublin and London stock exchanges, acquired 51 per cent of Sportsbet for $49m in May 2009. That price tag implies a value less than half the current deal.
It had maintained an option to buy out the balance of the business in 2012 under an earn-out agreement with Tripp and increased its stake to 60.8 per cent in February this year.
“When we acquired 51 per cent of Sportsbet in 2009, we were confident that we were investing in a business with strong potential in a growing market. That confidence has been borne out, and some. It’s a cracking business,” said Paddy Power chief executive Patrick Kennedy.
“The team has made great strides in marrying the best of both Sportsbet and Paddy Power.
“This is a good deal, to acquire the remaining shares early, which will allow us to drive development and investment and secure full participation in the upside of the business.”
Sportsbet reported profit before tax of $20.3m for the financial year ended June 30 and its gross assets at the time amounted to $116.5m.
The Australian Foreign Investment Review Board and the Northern Territory Racing Commission must approve the deal. Of the $132m offer, about $110.1m will be paid in cash with the balance in Paddy Power shares.
The Irish company said it would pay the vendors up to an additional $25m if Sportsbet’s 2013 earnings before interest, tax, depreciation and amortisation (EBITDA) exceeded $80m. Paddy Power acquired rival International Allsports for $40m, consolidating its position in the fragmented online and telephone betting market.
Merrill Lynch calculated that the price paid represented 8.6 times 2011 forecast EBITDA, or 9.1 times when adjusted for a one-off $8m special dividend payable before the sale is completed.
“While not cheap, this is a fair price in our view for a regulated business set to deliver 10-11 per cent EBITDA growth per annum over 2011-12,” it said.
Source: www.theaustralian.com.au
