27th Mar 2020 09:44
(Alliance News) - Flutter Entertainment PLC on Friday said it is no longer proposing to pay a pro-rated dividend immediately before its Stars Group Inc merger and intends to pay out its final 2019 dividend in shares only.
Shares in Flutter were down 5.1% at 7,030.00 pence in London in morning trading.
It announced its proposed all-share combination with fellow bookmaker Stars back in October 2019, with Stars shareholders to receive 0.2253 of a Flutter share per Stars share owned.
Flutter's shareholders will own 55% of the combined business, and Stars Group the rest. The combined business will be worth over GBP10 billion, and will be led by Flutter Chief Executive Peter Jackson.
When it announced the business combination, Flutter had expected that its shareholders would be entitled to a pro-rated dividend just before completion.
"This represented a time pro-rated amount of the total annual dividend for the financial year ending 31 December 2020, to which Flutter shareholders would otherwise be entitled if the combination had not proceeded," Flutter explained.
However, "given the anticipated financial profile of Flutter in the current year", this pro-rated dividend is no longer considered "prudent".
Furthermore, Flutter's shareholders will - subject to approval at its annual general meeting - be entitled to receive a final 133p per share dividend. As a consequence of the Covid-19 pandemic, Flutter's board is proposing to pay this dividend in the form of Flutter shares.
The new Flutter shares issued in connection with the Stars merger will not be entitled to the final 2019 dividend.
On top of this, Flutter said it is suspending its dividend for 2020 due to "the impact of the current disruption caused by Covid-19 and the ambition for the combined group to de-lever".
Flutter entered new debt arrangements on March 11 for a revolving credit facility and term loan amounting to GBP1.3 billion, though this is contingent on its combination with Stars. The money will be used to refinnance Flutter and Stars' debt and provide "ongoing financial flexibility".
The new facilities include a covenant of a net leverage ratio of 5.1 times when combined with STars' debt. The covenant includes "a material allowance for synergies when covenants are tested twice annually". The facilities are "tightly priced" at GBP LIBOR plus a fixed 175 basis points, which Flutter said reflects "the prevailing debt market conditions".
Divyesh Gadhia, executive chair of Stars, will join Flutter as deputy chair. In addition, Stars board members Rafael Ashkenazi, Richard Flint, Alfred Hurley Junior, David Lazzarato, and Mary Turner will join Flutter as non-executive directors.
Ashkenazi is Stars' chief executive officer and has "agreed to act as a consultant to Flutter".
Jan Bolz and Emer Timmons will depart Flutter's board, where they are currently non-executive directors. Senior Independent Director Ian Dyson will stepd down as senior independent director but will remain a non-executive directors.
Jackson said: "We are pleased to publish our prospectus and circular in relation to our combination with the Stars Group. In these challenging times I am more convinced than ever of the strategic fit of these two complementary businesses. The combined business will enjoy improved geographic and product diversification and allow us to advance our strategic goals.
"I am delighted that Rafi has agreed to join the Flutter board and to be available to me as a consultant given his extensive knowledge of Stars' international business. We continue to work with various competition and anti-trust authorities globally to secure the few remaining approvals required. We do so while never losing sight of our current primary objective to ensure the safety of our staff and customers during these unprecedented times."
By Anna Farley; [email protected]
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