Betfair chief ’s shrewd rejection of earlier offer
Amid merger talks with Paddy Power, shares three times more valuable than at time of private equity approach two years ago
WHEN Breon Corcoran, the boss of Betfair, spurned a £990m bid for the betting exchange in May 2013, he arguably made one of the biggest gambles of his career.
The former Paddy Power executive had taken the helm at Betfair less than a year before private equity house CVC and its partner Richard Koch attempted a takeover.
With the shares languishing well below their £13 float price, the final, sweetened 950p-a-share bid from the suitors must have seemed a tempting offer to Mr Corcoran.
But with Betfair stock closing at a record £31.34 last night after the firm revealed its merger talks with Irish bookmaker Paddy Power, Mr Corcoran’s decision to reject CVC has undoubtedly paid off. As well as sending Betfair shares to an all-time high, the tie-up with Paddy Power brings Mr Corcoran’s gambling career full circle and puts him in charge of a betting giant.
After spending six years as a derivatives trader, he joined Paddy Power in 2001, eventually rising to the role of chief operating officer, before leaving in 2011 to run Betfair, the exchange founded by gambler Andrew Black and former JP Morgan trader Ed Wray.
The mooted Paddy Power merger will see Mr Corcoran, 44, return to the Irish bookie and take the top job at what will be one of the world’s biggest online betting and gaming companies. The new company will have a market cap of almost £6bn, based on yesterday’s closing prices, and revenues of over £1.1bn.
“I wanted to get closer to technology, I think technology and product are a key determinant in who wins in digital industries and I’m very glad I made that choice,” Mr Corcoran said of his original decision to leave Paddy Power.
He has gone on to become one of the most respected executives in gambling. “It’s very rare to find someone with that complementary skill-set,” says Cenkos analyst Simon French, of Mr Corcoran’s understanding of sports betting and technology.
After shunning CVC’s bid, Mr Corcoran went on to transform Betfair’s fortunes.
“CVC just wanted to concentrate on high value customers, whereas Breon insisted that it very much had to be about recreational customers,” said Mr French. “The share price today shows he has been vindicated.”
Indeed, even before yesterday’s surge, Betfair stock was trading at almost triple CVC’s final bid. Mr Corcoran’s decision to move the Betfair brand away from its more exclusive image and withdraw from countries where gambling regulation is less clear-cut means the company approaches the merger in fine health, just like Paddy Power, which has developed a vibrant online business. The increasingly heavy tax and regulatory burden has spurred a wave of consolidation in the gambling industry this year.
However, the 33pc jump in first-half operating profits to €80m (£59m) that Paddy Power posted yesterday, and the 19pc rise in first-quarter adjusted profits to £41m that Betfair also reported, show the two companies have not been forced into a deal by higher taxes.
With both firms looking strong, if Mr Corcoran can successfully integrate the two, the resulting company will be a formidable force in gambling, particularly online betting. “It’s undoubtedly going to be the market leader,” said Mr French.
‘Breon insisted that it had to be about recreational customers. The share price shows he has been vindicated’