Paddy Power and Betfair back ‘a winner’ with Breon Corcoran
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Four years ago, when Betfair was looking for a new chief executive, there was one outstanding candidate: the chief operating officer of its rival, Paddy Power.
But Breon Corcoran, who had spent a decade in Dublin with the Irish bookmaker, was not sure he wanted to leave.
His rise at Paddy Power had been swift while the UK’s Betfair looked like a challenge. Having floated in 2010 at £13 a share, it was trading at near £8 a share as investors lost confidence.
“I never got the sense that he did not want the job,” says Edward Wray, co-founder and then chairman of Betfair, who still remains the company’s largest shareholder with roughly 9.5 per cent. “But he was certainly well-embedded in Paddy Power. It took us some time and quite a lot of effort to get him out of there.”
Now, almost exactly three years after taking the plunge and joining Betfair, the 44-year-old from Mullingar, County Westmeath, is set to put his green jacket back on. If everything goes smoothly in a deal announced on Wednesday, Betfair and Paddy Power will merge in January with Mr Corcoran at the helm.
“He knows both businesses inside out,” says Mr Wray. “Often when you do a merger, it is 25 per cent known and 75 per cent unknown. This is the other way around.”
Was this the plan all along? “I wish I could say I had that much foresight,” says Mr Wray, laughing.
Indeed, a year ago, a merger of equals would have been impossible. Betfair’s market capitalisation was below £1bn while Paddy Power’s was about €2bn.
But Betfair has had an astonishing run under Mr Corcoran, making the failed 950p-a-share offer from the private equity house CVC Capital Partners in early 2013 seem highly opportunistic. In the past 12 months alone, active customer numbers have risen 52 per cent to 1.7m and underlying free cash flow is up 47 per cent to £103.8m.
After hitting the top end of his targets, Mr Corcoran was awarded a bonus of £10m in Betfair shares, whose paper value rose more than £2m on the news of the merger.
Mr Corcoran’s strategy has been to take Betfair’s leading technology — it has the biggest gaming exchange, on which customers bet against each other, in the business — and build an easy-to-use, consumer-friendly format in front of it.
The result is that Betfair’s online sportsbook took £1.2bn in wagers last year, up 140 per cent, close to the £1.3bn that was staked at Ladbrokes.
“Breon Corcoran? He’s doing at Betfair what he did at Paddy Power,” joked one Paddy Power executive earlier this month. Now Mr Corcoran will be able to also do the reverse: bolt Betfair’s technology on to Paddy Power’s remarkable and often outrageous brand. Paddy Power is known for running tongue-in-cheek advertising campaigns.
Race for consolidation
● July 2015 888 Holdings and GVC chase Bwin.party. GVC says it will bid more than $1bn
● July Ladbrokes and Gala Coral announce a merger to create a group with a market capitalisation of £2.3bn
● Feb William Hill tries (and fails) to buy 888 with a £700m bid
● Feb Intertain Group buys consumer assets of Gamesys, including Jackpotjoy, for an initial £425.8m
● Dec 2014 CVC buys controlling 80 per cent stake in Sky Bet for £600m
● Jun 2014 Amaya Gaming buys Oldford Group for $4.9bn. The deal includes the PokerStars and Full Tilt brands
“Breon has re-engineered Betfair,” says Warwick Bartlett, the chief executive of Global Betting and Gaming Consultancy. “He has cut waste, introduced new products and made sure the company has stayed at the cutting edge of technology and innovation. The guy’s a winner.”
Alan Weinrib, an internet gaming consultant who has worked with Mr Corcoran, adds: “He had a vision with Paddy Power that no matter how good a deal looked he did not want to do anything that would dilute the brand, and how correct he turned out to be.”
The union of the two companies into the UK’s largest gaming company, sitting in the middle of the FTSE 100 with a combined market capitalisation in excess of £5bn, will leave rivals facing pressure to do their own deals.
William Hill, which has regularly been linked with Paddy Power, in a potential tie-up nicknamed “Will Power”, did not respond to requests for comment on its position now that it looks set to lose its market-leading status.
“This leaves William Hill in a tricky position,” says David Jennings, an analyst at Davy, the Irish stockbroker. “All of its major rivals are building scale. It probably leaves them all the more rueful they could not reach an agreement to acquire 888 earlier in the year.”
William Hill may not have the financial firepower to challenge the Betfair and Paddy Power merger, and Mr Jennings says a deal for online gambling group Bet365 is unlikely because of the latter’s exposure to unregulated markets.
“I think their move into the US and the recent investment in NeoGames [a US lottery business] shows that William Hill is thinking outside the box and this will continue,” says Nick Batram, an analyst at Peel Hunt.
Betfair’s combination with Paddy Power may be the biggest deal so far in the gambling sector, as companies seek the scale to compete with greater tax and regulation, but it is unlikely to be the last.
