PokerStars SkyBet Acquisition Hits Roadblocks as UK Antitrust Watchdog Launches Investigation

Posted on: July 18, 2018, 04:15h. 

Last updated on: July 18, 2018, 04:20h.

Cort Smith Read More
Expertise: Sports Betting, Sports.

A mega merger which would see the world’s biggest online poker site absorb one of the UK’s most sizable sports books has been put on hold.

PokerStars SkyBet merger alliance
A planned merger of two online giants is on hold, while Britain’s marketing watchdog decides if antitrust issues are involved. (Image: infoplay.info)

The UK’s Competition and Markets Authority (CMA) has launched an investigation into The Stars Group’s $4.7 billion purchase of SkyBet. The deal has been in the works for months, and after it was completed last week, the companies boasted that “the world’s largest publicly listed online gaming company” had been created.

That may be what’s at the crux of the CMA’s concerns, as it has since issued an Initial Enforcement Order and instructed the companies to halt all proceedings. Among other orders, the CMA is directing the organizations refrain making any management changes, selling or disposing of any assets, and making any alterations to their software or hardware.

The order also makes mention of Section 22 of the UK’s Enterprise Act of 2002. That part of the Act references acquisitions which lead to “the substantial lessening of competition” in the market.

The PokerStars client is currently home to about 63 percent of global poker traffic, according to PokerScout.

Similar antitrust considerations have seen comparable deals derailed in the US in the past.

Healthy Competition

In November of 2016, the two biggest players in the daily fantasy sports (DFS) landscape were poised to merge, creating a gaming behemoth which would have cornered 95 percent of the market.

With both DraftKings and FanDuel spending millions marketing their products, management for the two companies eventually decided that they’d be better off joining forces.

When the merger was announced, some antitrust experts predicted that the deal would never go through, and they were proven correct. The US Federal Trade Commission (FTC) eventually nixed the transaction, citing concerns over the competitive vacuum it would create in the US market. Antitrust experts called it a “clear win for American consumers,” according to ESPN.

The question now is if similar misgivings in the UK could eventually thwart a merger between PokerStars and SkyBet.

Stars Group Not Panicking

The CMA wields considerable clout when it comes to enforcing the Enterprise Act. It has the power to throw out a merger altogether, or order the companies to first themselves of certain assets before giving approval.

For their part, the brass at the Stars Group is taking the procedural pause in stride. In a statement addressing the investigation, Stars indicated that the deal is at no real risk of falling apart.

UK CMA review is common in such acquisitions, particularly within a sector where there has been previous consolidation,” read the statement.

In 2016, two of Britain’s biggest sports books, Ladbrokes and Gala Coral, attempted unification. The CMA intervened and launched an investigation based on competition concerns, but ultimately allowed the merger to go through.

The watchdog has not given a timetable for when their investigation into the Stars Group’s purchase of SkyBet may be completed.