The new group will be called Paddy Power-Betfair.
Alex Gersh, CFO of Betfair, would become CFO and an Executive Director of the combined group; while the new Chairman would be Gary McGann, Chairman of Paddy Power.
The tie-up is subject to due diligence by both companies first and then approval both by shareholders and competition regulators.
The deal frenzy in the betting sector is showing no signs of slowing down, with Paddy Power and Betfair the latest players to announce a merger. Ladbrokes has come under increasing investor criticism for it’s poorer online offering, an area in which Paddy Power has gained increasing market share.
Discussions continue regarding other terms of the merger.
Breon Corcoran, CEO of Betfair, would become CEO of the combined group.
In a joint statement issued to the stock exchange, the companies said: “The possible merger would create one of the world’s largest public online betting and gaming companies by revenue with enlarged scale, capability and distinctive and complementary brands”.
Paddy Power was founded in 1988 by the merger of three existing Irish bookmakers and it has become well known for its irreverent marketing style.
Operating profit was also up 33% on a year-on-year basis to €80.1 million, while earnings before interest, tax, depreciation and amortisation (EBITDA) hiked 27% to €106.1 million.
Betfair reported revenues of 135.4 million pounds, up from 117.3 million pounds in the same quarter previous year.
The new company is expected to have revenues of more than £1.1bn and will have opportunities to expand in Europe, the US and Australia.
Betfair meanwhile revolutionised the gambling industry when it was set up in 1999 with its online exchange and focus on betting over the Internet.