Italy’s Lottomatica has agreed to buy Spanish rival CIRSA in a €2.8 billion all-share deal to create the world’s second-largest listed gaming and sports betting firm, the two companies said.

U.S. fund Blackstone, currently the main shareholder in CIRSA, will become the single biggest investor in the joint group whose adjusted pro-forma core profit is projected at €2 billion ($2.3 billion).

Lottomatica will pay CIRSA investors 0.668 new Lottomatica shares for each CIRSA share tendered. The exchange ratio values the Spanish firm’s shares at €16.55 each  – a premium of just over 21% according to Reuters calculations based on Tuesday’s closing prices.

 “The transaction appears strategically compelling: Lottomatica is using its equity to acquire a lower-valued business, while retaining 67.5% of the combined entity,” JPMorgan analysts said in a note. “Having executed exceptionally well in Italy  – where it is the number one in an attractive, growing market – we see Spain as a logical next leg of growth.”

The combined company will be listed on Euronext Milan and Spanish stock exchanges. Before closing, CIRSA will pay its shareholders an extraordinary dividend of €262 million.

The merger is expected to generate €115 million of pre-tax cash benefits after three years from completion. During that period, the combined company plans to return to shareholders up to €4 billion as dividends and share buybacks.

Headquartered in Rome with secondary offices for CIRSA in Barcelona, the combined company will retain Lottomatica’s name and will be led by the Italian firm’s current chairman and chief executive, Guglielmo Angelozzi.

Blackstone will appoint two new directors on the new company’s board alongside Lottomatica’s current 11 directors.