Flutter Entertainment agrees $4.2bn deal to increase stake in FanDuel

3rd December 2020 2:02 pm GMT
Flutter Entertainment

London-listed Flutter Entertainment has entered into a conditional agreement to acquire Fastball Holdings’ entire 37.2 stake in US sports betting and fantasy sports operator FanDuel for $4.2bn.

The accelerated buy-out takes Flutter’s stake in FanDuel from 57.8 per cent to 95 per cent, with the remaining 5 per cent interest held by Boyd Gaming.

Flutter will acquire Fast Ball’s stake through a combination of $2.09bn in cash and the issue of approximately 11.7m new Flutter ordinary shares. The cash element will be funded through cash on balance sheet and an equity placing to raise approximately £1.1bn, involving new and existing institutional investors such as FOX Corporation.

“Flutter's initial acquisition of a controlling stake in FanDuel in 2018 has been transformational for the shape of the group,” said Flutter chief executive Peter Jackson. “Our number one position in the crucial US market is built on many of the assets we acquired through that transaction, supported by the broader group's capabilities. Our intention has always been to increase our stake in the business and I'm delighted to be able to do so earlier than originally planned and at a discount to its closest peer.

“I would like to take this opportunity to thank our partners in Fastball for their tremendous support over the last 2½ years and for their ongoing commitment to Flutter as soon-to-be shareholders in the wider group. We look forward to continuing to grow our US business, alongside our key media partner FOX, as further states move to regulate sports betting and gaming.”

Flutter (then Paddy Power Betfair) acquired its initial controlling stake in FanDuel in May 2018 through a cash investment of $158m and the transfer of its existing US assets, principally TVG and its New Jersey online casino, into a newly merged US group.

Following a subsequent market access deal with Boyd Interactive Gaming, Flutter's stake in FanDuel stood at 57.8 per cent. A mechanism was put in place to facilitate the sale of Fastball's remaining 37.2 per cent stake in FanDuel to Flutter in two tranches in July 2021 and July 2023 at prevailing market valuations, with put and call options in place based on those valuations.

Flutter’s board concluded however that it was in the best interest of Flutter shareholders to avail of the discount factors through this alternative transaction now and remove pricing uncertainty in acquiring Fastball's stake in FanDuel.

The transaction also simplifies the economic position in relation to FOX Bet, which was established as part of the combination between Flutter and The Stars Group, with Fastball granted an economic interest in the joint venture.

This involved Fastball receiving the equivalent of 11 per cent in the uplift in the valuation of FOX Bet between May 2020 and July 2023. Pursuant to the terms of this transaction, Fastball's right to receive the FOX Bet value payment from Flutter has been terminated.

“We are delighted to participate in this capital raising,” said FOX Corporation executive chairman and CEO Lachlan Murdoch. “Maintaining our ownership stake in Flutter signifies our long-term commitment to Flutter, and ongoing confidence in management's ability to execute against the fast growing US opportunity.

“FOX's audiences have proven to be highly engaged with free to play and wagering content, and we are excited to offer them access to products from Flutter's market leading stable of US brands."

Flutter intends to offer to FOX Sports the option to purchase 18.5 per cent of FanDuel at fair market value in July 2021, with substantively the same terms and valuation mechanism that FOX Sports and Flutter previously agreed would have applied to the Fastball put and call options.

FanDuel currently has over 9.5m customers across the US, approximately 40 per cent of which were acquired in the first two years from its daily fantasy sports database.

Shares in Flutter Entertainment plc. (LSE:FLTR) were trading 11.26 per cent higher on the news at 14,870.00 pence per share in London Thursday afternoon.

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