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Flutter to proceed with Stars Group merger despite COVID-19 impact

Irish sports betting and gaming company Flutter Entertainment PLC and Canadian peer The Stars Group Inc. will proceed with their planned merger despite the likely impact of the coronavirus outbreak on their combination.

The two companies in a March 27 joint release acknowledged that the disruption caused by the global health crisis to the global online betting and gaming sector is expected to impact the financial profile of the merged group.

However, the boards of both companies "continue to believe strongly in the strategic rationale for the combination," according to the release.

Under the merger agreement, which was announced in October 2019, Flutter shareholders will hold about 54.64% of the combined entity, with Stars Group shareholders owning the remaining 45.36%.

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In the latest announcement, Flutter said it secured new debt arrangements comprising a term loan and revolving credit facility totaling £1.3 billion. The company plans to use these facilities to refinance the existing debt of both Flutter and Stars Group and provide the combined entity with financial flexibility.

To minimize the impact of the outbreak on the group's capital structure, Flutter said its final dividend for 2019 will be paid in shares rather than cash. The combined group plans to suspend its dividend for fiscal 2020.

Flutter and Stars Group also said they will propose Divyesh Gadhia, Rafael Ashkenazi, Richard Flint, Alfred F. Hurley Jr., David Lazzarato and Mary Turner to be appointed directors of the new entity at the group's May 14 annual meeting. The companies will nominate Gadhia as deputy chairman.

Shares of Stars Group closed down 8.3% at C$24.78 in Toronto on March 27, while shares of Flutter in Dublin closed down 10.8% at €73.20.