Flutter Entertainment Buys 37% stake in FanDuel for $4.18 bn

Flutter Entertainment is betting heavily on the US market, increasing its holding in FanDuel, the popular online sportsbook, to 95%. Flutter will accomplish that by buying more than a 37% stake in the sportsbook from Fastball in a deal worth $4.18 billion.

In 2018, Flutter Entertainment merged its US business with FanDuel, exercising its option to buy the entire company ahead of schedule.

Shares in Flutter spiked in Dublin trading following the announcement of the deal, trading 6% higher at the close of business.

FOXBet in Play Too

Flutter reports that it plans to raise £1.1 billion in equity to partially fund the purchase. The Dublin-based company will also offer FOX Sports the option to buy 18.5% of FanDuel at the fair market value this summer.

The most recent deal takes Flutter’s stake in FanDuel from 57.8% to 95% and ends Fastball’s interest in FOX Bet, an online sports betting platform.

The deal simplifies the position of FOXBet; in 2019, Fastball was given an interest in the US-based sportsbook as part of Flutter’s merger with the Canadian company, Stars Group. This essentially transformed Flutter into one of the world’s biggest online sports betting and gaming operators.

Flutter Entertainment expects to use a combination of $2.09 billion in cash and the issuance of 11.7 million new ordinary shares to Fastball to pay for the stake. Fox Corporation will also play a part in the capital raising.

Davy stockbrokers and Goldman Sachs are acting jointly as global coordinators and bookrunners for the placing.

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Increasing Fanduel’s US Market Exposure

Flutter believes the transaction will materially increase Fanduel’s exposure within the US market, which it calls the “most attractive sector opportunity” at present.

Flutter’s stake in the US gambling market is comprised of the FanDuel Group, which included the FanDuel sports betting and daily-fantasy-sports brand, the Betfair online casino in New Jersey, and the TVG broadcasting, which focuses on horse and greyhound racing.

Executive chairman and CEO of Fox Corporation, Lachlan Murdoch, said that maintaining its ownership stake in Flutter Entertainment signals Fox’s long-term commitment to Flutter and its continued confidence in its management’s ability to capitalize on the fast-growing US gambling market.

“FOX’s audiences have proven to be very engaged with free to play and gambling content, and we’re excited to offer them access to products from Flutter’s market-leading US brands,” Murdoch said.

Flutter’s chief executive, Peter Jackson, said the company’s 2018 acquisition of a controlling stake in FanDuel was “transformational.”

“Our number one position in the important US sport betting market is built upon the many assets we acquired through acquiring Fanduel, and also supported by the broader group’s capabilities,” said Jackson. “Our intention has always been to increase our stake in Fanduel, and I’m happy to be able to do so earlier than planned and at a discount to its closest competitor.”

Flutter reports that the deal is still pending, on the condition of shareholder approval.

Last month, Flutter Entertainment upgraded its full-year earnings guidance following robust customer growth across every key region, boosting third-quarter revenues by 30%. To put it simply, its third-quarter performance exceeded expectations in both sports betting and iGaming.

In November, the world’s biggest online gambling company reported that it expects full-year earnings before interest, tax, depreciation, and amortization of £1.275-1.350 billion, up from the August forecast of £1.175-1.325 billion.

However, that forecast excludes its huge investment in the US market, where a 2020 EBITDA loss of £160-180 million is expected, up from the previous forecast of £140-160 million.

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