Fair dinkum, Paddy Power´s bound for Oz

The Irish online and offline gambling group Paddy Power has taken its aggressive expansion strategy a stage further this week with the A$ 48.5 million acquisition of a controlling stake in the Australian sports betting firm Sportsbet.
A$48.5 million bought Paddy Power a 51 percent stake in the company and will be accompanied by the issue of 100 000 Paddy Power shares to Sportsbet investors. The cash consideration will be funded from Paddy Power’s strong cash reserves of Euro 96 million. Sportsbet shareholders will receive a further bonanza of some A$ 10 million in early 2010 conditional on Sportsbet EBITDA in 2009 exceeding A$ 16.5 million. The chances of this performance level being reached are good, as the company has already estimated its EBITDA at A$ 14.6 million at the half-year point.
The deal will incentivise Sportsbet’s CEO and main shareholder Matthew Tripp, who will continue to helm the company, with four Paddy Power directors joining his board, including PP chief exec Patrick Kennedy and head of retail and online operations Breon Corcoran.
Sportsbet owns almost 20 percent of the Australian gambling group International All Sports, itself recently the target for an attempted but unsuccessful takeover by Centrebet
The downside for Sportsbet shareholders is that if performance falls between June 2010 and 2012, and EBITDA falls below A$ 11 million, Paddy Power has the right to recover from the equity of Sportsbet shareholders.
“The acquisition adds a new dimension to our business portfolio to which we can bring trading, risk management and marketing expertise honed in Ireland and the UK to complement Sportsbet’s existing skills and experience,” Patrick Kennedy told Paddy Power shareholders this week.

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