FOR the boss of what is soon to become Britain’s most powerful bookmaker, Breon Corcoran doesn’t seem too interested in sport. “I’m not even an amateur athlete,” laughs the Betfair chief executive. “First and foremost, for me, this is a data-rich business.”
What about the thrill of an outsider romping home, the ecstasy of a last-minute goal? That doesn’t excite the 44-year-old much, either. “The sport thing is obviously helpful,” he concedes. “But I can’t imagine working in a sport-only business, where you didn’t have the feedback loops you have in an internet business.”
Feedback loops? Not exactly the patter you would expect from the boss of a bookmaker. But does that make Corcoran a bloodless functionary in a world of wheeler-dealers? Don’t bet on it. Corcoran has just completed a year in which he has masterminded Betfair’s ascent into the big time. A £5.7bn merger with rival Paddy Power, announced in August, will catapult the understated Irishman into the ranks of FTSE 100 bosses. His company’s share price has surged 144% in a year.
In sporting terms, he has had a season to rival Arsenal’s Invincibles, or Manchester United’s treble winners, though that probably wouldn’t mean much to Corcoran.
He is a long way from the typical bookie. He read mathematics at Trinity College Dublin, and then was a City trader — including a stint at JP Morgan — before moving, briefly, into recruitment. An MBA at Insead business school in Paris led him to a job with Paddy Power in 2001.
It has been a frantic year for deals in the betting industry. Ladbrokes and Gala Coral agreed to merge in July. Not long after Betfair and Paddy Power tied the knot, GVC won a long-running battle to buy Bwin.party for £1.1bn. Early in the year, William Hill very nearly snapped up the online specialist 888 in a £700m deal.
Corcoran has come out on top of the pile. In contrast to their rivals, shares in Paddy Power and Betfair have risen sharply since the merger announcement. And, unlike other big British businesses — from the brewer SAB Miller to the app developer King Digital — Betfair is building its own success story, rather than batting its eyelids in an effort to attract the biggest possible offer from a deal-hungry suitor.
It is because Corcoran is a builder, not a seller, a man with a clear vision in an industry cluttered with loudmouth opinions, that he is our Business Person of the Year 2015.
In an industry traditionally dominated by veterans — former William Hill boss Ralph Topping spent more than 40 years with the company — being an outsider has helped, says the Irishman.
“I think being a no more than average mathematician, but being a mathematician originally, I’m well aware of my limitations,” explains Corcoran in his soft lilt. “Therefore I’m happy to lean on colleagues when it comes to the product side of the business.”
The black-and-white mind of a mathematician helped during negotiations with Paddy Power. News of the merger took many in the industry by surprise, but it had been years in the making.
Corcoran kept in close contact with his former employer after his move to Betfair in 2012. “It’s no exaggeration to say, primarily on a social basis, we had high-level chats about the industry over the years,” he says. “I know a bunch of people there. And those chats continued.”
Despite the cosy relations, it wasn’t until last December that the idea of bringing the two bookies together started to grow in his mind.
Betfair had just reported bumper results, increased its dividend by 50% and announced plans to return £200m cash to shareholders. After years of trailing behind its Irish rival, suddenly Betfair’s shares “started roaring”. Then, in January, Andy McCue — whom Corcoran had hired a decade earlier — took over as chief executive of Paddy Power. A new chairman, Gary McGann, started in July and matters “intensified quickly thereafter”.
From start to finish, the detailed negotiations took about three weeks, a remarkably short time frame for a multibillion-pound merger to come together. Meetings took place in Dublin and London. Corcoran was on holiday in America with his wife and three children part of the time. He didn’t get much time to relax.
On both sides, pride was put on hold. “People didn’t let egos stand in the way. We had a proper conversation about the right thing to do for the businesses.”
Still, secrecy was paramount. The boards knew that the biggest beasts in the industry — William Hill and Ladbrokes — were looking for deals. “If it had been leaked to the press, or if it had been misconstrued externally, then it might have killed the thing,” says Corcoran.
There have been no hiccups, though. The Competition and Markets Authority approved the tie-up this month. Last week shareholders on both sides voted in favour. The resulting company, Paddy Power Betfair, will be a giant with more than 7,000 staff and annual sales of nearly £1.2bn. It will have a UK market share of about 18%, ahead of William Hill’s 15%.
The driving force behind the deal, says Corcoran, was a desire to choose a partner rather than be forced into a marriage of convenience. A new tax on online gambling, introduced at the end of last year, put the squeeze on Britain’s bookies. As winter turned to spring, it became increasingly obvious that the best way to achieve growth was through combinations.
“The opportunity to get these things done doesn’t stay around for ever,” says Corcoran. “Our board was of the view that if consolidation was to happen, you wanted to choose your own partner. You didn’t want to end up in a partnership or relationship by necessity, you wanted to be on the front foot. We wanted the first pick. That kept people focused.”
On the face of it, Betfair and Paddy Power are unlikely bedfellows. Just as dogs come to resemble their owners, so Betfair mirrors the personality of its chief executive. Sober, intellectual and numbers-driven, it is regarded as the thinking man’s betting platform. It has boasted about the power of its algorithms.
Paddy Power, on the other hand, is renowned for its outrageous, borderline tasteless, marketing stunts. A classic example: the former Arsenal striker Nicklas Bendtner was fined after dropping his shorts to reveal Paddy Power underpants when he scored for Denmark at the Euro 2012 championship. The company even employs a head of mischief.
Corcoran’s challenge will be melding the two cultures. He admits he has his work cut out. “Maybe they’re not [an obvious fit] at first blush — people see Paddy Power’s brand one way and us as product-led. But beneath the surface, the complementarity is extraordinary.”
Part of the attraction of the deal is the opportunity to wield the axe on costs. Paddy Power Betfair has forecast annual savings of £50m in its third year. Most analysts expect that to include job losses but details have yet to be announced. The new company will be based in Dublin but its main listing will be in London. The FTSE 100 will give it access to a broader base of investors who put in money through tracker funds.
At the same time, Corcoran will enter the big league of executive compensation. His annual pay could reach £4.2m — a 30% boost to his existing package. His shares and options in Paddy Power Betfair will be worth more than £50m.
Given Corcoran’s achievements, it is easy to see why the board of the enlarged bookmaker wants to keep him happy. Since joining Betfair, he has overseen a dramatic transformation.
When the company was founded in 2000 by Ed Wray, a former derivatives trader, and Andrew Black, a professional bridge player and technology consultant, its betting-exchange technology was hailed as revolutionary. It employed PhD students to develop new products and appealed to City traders who could compete against each other to win cash on golf, football and tennis. When the company floated in 2010, it was heralded as a glorious British success story.
A valuation of £1.4bn didn’t seem outrageous. On the first day of trading, the shares rose 20%. But then disaster struck. A series of underwhelming results and unexplained delays to new product launches spooked the City. The shares sank to 50% below the £13 float price and did not rise above that figure for four years.
Amid the turmoil, Corcoran was poached from Paddy Power. He had to take 10 months’ gardening leave, during which time Betfair continued to struggle. After he joined in August 2012, things didn’t get any easier.
With its share price suppressed and investors demanding improvement, the company was a prime takeover target. The bid came in early 2013, when the private equity giant CVC Capital Partners offered £8.80 a share. It eventually raised this to £9.50 but Corcoran and his chairman, Gerald Corbett, stood firm.
Still, the bookie came within a whisker of being sold. During a dawn meeting at Goldman Sachs in London on the day CVC had to make its final offer, Betfair’s board was ready to accept an offer at the right price. “It could have gone either way,” says the chief executive.
Not selling now looks like a spectacularly good decision. The shares stand at £38.02, 300% above CVC’s final offer. Back then, however, some shareholders were not happy with the board’s strategy and opted to sell out. “That was their decision,” says Corcoran, just the tiniest hint of vindication creeping into his voice.
The CVC bid was a turning point for him and the company. “The approach from private equity really galvanised the whole organisation. It’s quite something to keep control of your own destiny.”
Corcoran’s strategy since then has centred on subtly shifting Betfair’s image. It has always been seen as a serious alternative to its peers, with a somewhat complex system that favours calculation above instinct. Whereas Ray Winstone’s levitating head screams “bet in-play, now” in Bet365’s ads, Betfair — like its boss — is calm and understated.
“For some people, betting is very light entertainment. The frivolity of some brands resonated with their thinking. For other people, betting is a very serious hobby, it’s a very serious business. Traditionally we’ve appealed more to what we’d call the studied gamblers.”
That, however, is changing — a process that will be accelerated by the Paddy Power merger. In 2011, Betfair was the first bookie to allow punters to “cash out” — banking their winnings in-play, before the full outcome of the event is known. These days, all Betfair’s brasher rivals run similar schemes.
“Critics could say in the past we were more product-centric than was healthy,” admits Corcoran. “To get growth, we have to go after a broader audience, and that is more recreational.”
Corcoran will have immediate access to the sort of punter he craves when the Paddy Power deal is completed. But his ambitions lie well beyond cornering the market for lads who like a flutter at the weekend. Betfair has been taking tentative steps in America in the states that permit gambling. It has an online horse-racing site and an online casino there. Paddy Power, meanwhile, has growing businesses in Australia and France. “The opportunities now in front of us are in terms of international and product development,” he says.
It is telling that Corcoran rarely, if ever, refers to his company as a bookmaker. “This will be the largest listed digital business in Europe,” he says. That is reflected in the sort of talent the chief executive tries to attract. “The team here are largely digitally motivated rather than sports.”
Rivals have in the past underestimated this approach, dismissing it as intellectualism in a business that relies more on impulse. They do so at their peril. A competitive core runs through Corcoran that rivals any sporting champion.
“We value intellect and we value pace, but we value people who are thoughtful about how to win and that’s really the essence of what’s going on here rather than purely analytics,” he says.
And what about betting shops? Surely this moderniser has no time for the high street — which is potentially a problem given that he will inherit nearly 600 stores from Paddy Power. Not so, he insists. “We’re excited about the Paddy Power Irish business, the market leader, and we’re excited about their UK business, which is probably the most profitable high-street business per shop.”
A dutiful answer, after which Corcoran pauses, one of several long hesitations during our conversation. “But it’s very important to us and to our shareholders that we’re fundamentally a digital business. That’s where we expect most growth to come from.”
I ask if he thinks betting shops will still exist in 20 years. At this question, other gambling company bosses have flown into either an impassioned defence of the high- street bookie or an evangelical rant about the need to move online.
Not Corcoran. Again he pauses. “Let me just think about the maths.”
Amid gambling turmoil, high rollers back mergers
Teddy Sagi: in talks to buy football pools
A controversial Israeli billionaire is at the centre of the latest round of dealmaking in the gambling industry.
Teddy Sagi, whose wealth is estimated at $3.4bn (£2.3bn), is backing a plan to take over the football pools. AIM-listed Netplay, in which Sagi is the biggest shareholder, has held talks to buy the pools from current owner Sportech in a deal worth about £100m.
The football pools began in 1923 and at the height of their popularity were played by 10m people a week.
However, they have fallen out of favour in recent years as punters have switched to games with higher jackpots, such as the national lottery and easily accessible football betting games on mobile apps. About 300,000 people still play regularly. The pools had revenues of £38m last year.
Sagi is best known in Britain for creating betting firm Playtech and then listing it in London. He has been on the lookout for deals throughout the year, without success. Last month Playtech was forced to give up its £460m pursuit of trading platform Plus500 after regulators raised concerns about the acquisition.
It has been a busy year for bookmaker bosses. The dealmaking reached its height during the summer as the industry’s big players looked to buy up smaller rivals.
The backdrop to the feeding frenzy has been a period of unprecedented turmoil in the betting industry. A grinding new tax on online wagers, restrictions on in-store betting terminals and a rapid shift to gambling on mobile phones over the past two years have ramped up the pressure on bookies. Their answer is to seek safety in numbers. Scale is seen as the safest route to growth.
First out of the blocks was William Hill, which attempted to buy online rival 888 Holdings for £700m in February. The deal was vetoed late in the day by 888’s largest shareholder.
That left 888 free to pursue its own targets. The company looked to be leading a race to buy digital gambling giant Bwin.party for close to £1bn. But it was usurped as preferred bidder at the last minuted by rival gaming group GVC, which had enlisted the help of Wall Street raider Cerberus to provide debt to fund the deal.
Now 888 looks like a target again and William Hill could come knocking.
Possibly the highest-profile combination of the year was announced in July. Ladbrokes and Gala Coral revealed plans for a £2.3bn merger, which would create a powerhouse with about 4,000 betting shops. Shareholders have recently voted in favour of the tie-up, despite the efforts of Irish billionaire Dermot Desmond to derail the process at the last minute. The merger is being scrutinised by the Competition and Markets Authority. Ladbrokes’s new chief executive, Jim Mullen, who wasn’t told about the Coral deal until the day he was appointed, might be forced to sell off a number of the shops to allay concerns.
If the deal goes through, the new company will be placing a huge bet on bricks and mortar sites at a time when others in the industry are choosing to move online. That doesn’t appear to bother Mullen. In an interview with The Sunday Times in October, he put up a passionate defence of the high-street bookie.
“I’m a fan of retail. I listen to a lot of clever analysts who say the time for retail is over. It is not,“ he said. “When the artisan bakeries and the pop-up cereal shops have been and gone, the Ladbrokes shops will still be there [and] so will the William Hill shops and so will the Paddy Power shops.”
Betting shops do still generate large amounts of cash and punters still love them because they can feel cold, hard cash in their hands.
But it remains to be seen whether Mullen — or Betfair’s boss, Breon Corcoran, who makes no secret of his preference for digital — has backed the right horse.