Well, who’d have bet at 7am, Wednesday on the likelihood of a merger of Paddy Power and Betfair, let alone its announced timing just minutes later?
But, as with even the most un-fancied of winning mounts, the attractions of the bet in hindsight look all the more alluring even as the nag is flashing past the finishing post.
Not that those punters, otherwise known as shareholders in each company, won’t derive further short-term returns from the merger despite their inability to exploit prior inside information from either stable.
The share price of both companies jumped by about 20% through Wednesday alone, driven principally by the perceived audacity and merits of the proposed tie-up, and by the very strong latest quarterly financial and trading performance announced by each firm.
Up to three million Paddy Power shares traded through the day, signalling that some existing owners were happy to cash in immediately.
Other existing and new owners must have been attracted not only by the longer term prospects of the alliance, but also by the pledged €80m distribution to shareholders prior to completion of the deal.
So what about those longer-term prospects and benefits?
It’s true that both companies currently offer quite different gambling products: Paddy Power offering fixed odds to punters which they can either accept or reject; and Betfair acting as a fee-based, exclusively online exchange for punters who wish to agree odds between themselves.
But in a rapidly-changing and consolidating sector, where even the traditional bookie shop serves increasingly as a portal to a bewildering range of global gambling options, both organisations have excelled to date in terms of the sophistication and innovation of their product range and mix and the ingenuity of their marketing strategies.
This expertise and the financial returns generated can only be compounded with greater efficiency and horse power to a broader range of markets, by the proposed merger.
Then there is the quality of the management team and the speed at which the succession has been agreed. This issue can often hole a newly-launched merger vessel before the waterline before it leaves the port but it’s instructive in this case that the CEO and CFO positions of Paddy Power Betfair will be filled by the Betfair duo of Breon Corcoran and Alex Gersh respectively.
Instructive also, that this thorny issue has been agreed within the short four-week period in which the merger details to date have been propagated and agreed.
Corcoran, in particular, has shown vision and no little corporate courage (turning down an attractive take-over offer from private equity raider, CVC, almost as soon as he took the job) during his relatively short term at the helm of Betfair.
His flair and continued partnership with numbers man Gersh will prove a significant benefit to the new larger entity, as will his existing strong relationship with former colleagues at Paddy Power, which he left just four years ago.
With all due respect to current Paddy Power, CEO, Andy McCue, who is happily staying put as COO, the new senior management team is best positioned to drive optimal returns from the new combo, given their track record and network of relationships.
Some chat on the markets yesterday that Corcoran’s dynamism and raw energy may need to be tempered slightly in an entity with a combined market capitalisation of €7.5bn; if so, no better man to act as counterfoil and wise old sage, than Gary McGann, chairman of the new group.
A surprise, new thoroughbred then, newly-born but with a glittering track record already established and with excellent blood lines on both the sire and dam sides. One to watch, as they say at the track – and the bookies...
