Paddy Power plc has acquired Sportsbet Pty Limited

July 2009 — Paddy Power plc has acquired Sportsbet Pty Limited for US$42 million.

Formed in 1988, Paddy Power is the largest provider of online betting and gaming services in Ireland and a leading provider of such services in the UK. Operations are divided between online, retail and telephone services to customers in Ireland and the UK. In 2008, amounts staked exceeded US$2 billion. Online services generate over 70% of operating profit. Paddy Power is publicly quoted and capitalized at US$800 million.

Sportsbet is an Australian licensed sports bookmaker. It accepts wagers on Australian and international horse, harness and greyhound racing as well as all manner of local and international sporting, political and entertainment events. Wagering turnover exceeds US$780 million.

Our role in the transaction

Oaklins' teams in Australia and Ireland advised Paddy Power plc, one of the UK and Ireland's largest bookmaking groups, on the implementation of its market entry strategy into Australia following the change in legislation to allow internet advertising in the betting and gaming sector. Several targets were identified and prioritized on the basis of publicly available research and market intelligence.

Discussions were initiated with the shareholders of one of Australia's leading corporate bookmakers, Sportsbet, which had been established some five years earlier in its present form by a family and co-investors who had previously sold a betting business to Sportingbet plc. As Sportsbet was growing quickly and very profitably, it was clear that it would be difficult to strike a deal that balanced current earnings and future prospects. After lengthy negotiations, an up front payment for 51% of Sportsbet was struck together with an earnout payment over a period of three to four years based on profitability in the future. The transaction was prominent as it represented the market entry of a significant competitor to the major betting companies in Australia, which were formerly state-owned.