The international owners of Australian wagering groups SportsBet and BetEasy will merge, setting the scene for massive tie-up between the country's two largest online bookmakers.

Irish gambling group Flutter Entertainment, which owns Sportsbet, on Wednesday announced it would merge with Canada's Stars Group, which owns BetEasy, in an all-share deal that will create the world's largest online betting company.

The owners of Sportsbet and BetEasy will merge. Credit:Mark Evans

The deal comes at a time of consolidation in the gambling industry in Australia and internationally as operators face stiff competition and tightening profit margins. The BetEasy brand, for example, was born out of CrownBet's takeover of William Hill Australia.

In Australia, online bookmakers have been challenging the Tabcorp-owned TAB, which has a monopoly on retail bookmaking shops, but life has become more difficult for them with the introduction of state-based digital betting taxes.