Paddy Power and The Stars Group have agreed to merge in an all-share deal to create one of the world’s largest online betting and gambling companies.

Flutter Entertainment, formerly known as Paddy Power Betfair, said it would combine with Nasdaq and Toronto-listed Stars Group, owner of Poker Stars. 

Following the merger, shareholders of Flutter would own about 54.64% of the new company, with TSG shareholders owning about 45.36% of it. 

Shares in Flutter soared over 12% in opening trade in Dublin this morning.

The companies said today that their combined annual revenues would have totalled £3.8 billion in 2018, making it the largest online betting and gaming operator globally. 

The merger is expected to deliver pretax cost synergies of £140m a year, along with opportunities to cross-sell products to one another’s customers in international markets and lower finance costs, they said. The deal is also expected to boost Flutter’s underlying earnings per share by at least 50% in the first full financial year following completion. 

Under the terms of the merger, TSG shareholders will be entitled to 0.2253 new Flutter shares for each TSG Share. 

Flutter has sharpened its focus on North America as the potentially huge US market opens up and it faces higher taxes and increased regulations in its main Irish, UK and Australian markets. The Dublin-based company merged its US business with fantasy sports company FanDuel last year in a deal it said creates the industry’s largest online business in the US. 

Betting exchange Betfair and Paddy Power, which runs betting shops as well as an online business, merged in 2016 amid a flurry of consolidation in the sector, although the integration took longer than anticipated and a toll product investment for a time.

Peter Jackson, CEO of Flutter, said the deal represents a great opportunity to deliver a step change in the company’s presence in international markets.

Mr Jackson said it will ensure Flutter is ideally positioned to take advantage of the “exciting opportunity” in the US through a media relationship with FOX Sports as well as its development of US sports betting through its FanDuel and TSG’s FOX Bet brands. 

“The combination will turbocharge our existing four-pillar strategy and provide world-class capabilities across sports betting, gaming, daily fantasy sports and poker, as well as greater geographical and product diversification,” Mr Jackson said.

“We believe the combination of Flutter and TSG will deliver substantial value for shareholders. We will have an exceptional portfolio of leading recreational brands and best-in-class products on industry-leading technology platforms,” he added. 

Rafi Ashkenazi, CEO of TSG, said that the combination with Flutter will further enhance the company’s core strengths, and position it strongly for the future in this rapidly evolving industry.

When the deal is complete, Peter Jackson – currently CEO of Flutter – will assume the role of CEO of the combined group, while Jonathan Hill, currently CFO of Flutter, will assume the role of CFO. 

Rafi Ashkenazi, currently CEO of TSG, will assume the role of COO and Gary McGann, currently chairma of Flutter, will assume the role of chairman of the combined group.