Flutter raises $1bn in additional shares to boost US investment

Flutter Entertainment has raised $1bn by issuing 8,045,995 new shares to institutional investors as it looks to reduce annual costs and increase its investment in the US.

The final figure fell just under the $1.05bn initial estimate revealed at the launch of the share issue on Thursday afternoon.

In addition to preparing for potential M&A opportunities post Covid-19, the funds will help accelerate its US strategy to provide the “best possible platform” for future success post TSG merger.

As part of this, Flutter will look to secure additional market access deals in the individual US states as well investing further in customer acquisition.

The fund raising will also facilitate a faster de-leveraging of the Group’s balance sheet, leading to immediate interest cost savings and reduced annual cash outflows.

“The Group believes that the current operating environment is likely to result in longer-term changes to the sector landscape which will lead to further opportunities,” Flutter said.

“The Placing will better position the Group to move quickly to capitalise on such opportunities should they arise, accelerating its four-pillar strategy and consolidating its market leadership positions,” Flutter confirmed in a statement late on Thursday evening.

International brokerage firms Goldman Sachs and J&E Davy have been confirmed as joint bookrunners in respect of the new shares.

In its latest Q2 trading update, the newly-merged international operator revealed its Q2 proforma group revenue had increased by 10% year-on-year.

This was buoyed by a 61% spike in revenue in its US facing business, which comprises Fox Bet, PokerStars and FanDuel Group.

Revenue from the firm’s Australian business also grew during the quarter, jumping by 56% year-on-year, thanks to the continuation of racing on a behind-closed-doors basis.

However, the Paddy Power online and retail business revenue dropped by 54% in Q2, coloured by a 41% fall in PPB online and a 100% revenue drop in PPB retail during the period. In addition, Sky Betting and Gaming revenue fell by 28% during the quarter.

Flutter Entertainment CEO Peter Jackson said the business has been navigating through “extraordinary change” due to the effect of Covid-19, but paid tribute to the hard work of the business during the period.

“As with many other sectors, in betting and gaming there have been stark impacts as much of the world has gone into lockdown, with some parts of the sector struggling and others thriving as consumers change their purchasing habits,” Jackson said.

“Today we are starting to look more directly to the future in terms of planning for growth whilst we continue to benefit from our product and geographical diversification as the unpredictable situation unfolds,” Jackson added.

Following the announcement Peel Hunt upgraded its rating for Flutter shares to hold from reduce, although the analyst firm said it still thought the valuation was high.

Numis estimates Flutter will generate a FY20 group revenue of $5.7bn, down 13% on the previous year with an EDITDA of $1.2bn, 7% ahead of consensus.