Paddy Power Betfair and Pokerstars owner Flutter Entertainment has conditionally agreed to purchase a further 37.2% stake in US betting and daily fantasy sports brand FanDuel from Fastball for $4.18bn(£3.13bn).
The deal will increase its stake in the business from 57.8% to 95%.Flutter then intends to offer media giant Fox Sports the option to purchase 18.5% of the brand for fair market value in July 2021.
Flutter will pay $2.09bn to Fastball – a consortium of investors headed by venture capital giant KKR – in cash for its entire stake in the business, of which £1.1bn ($1.48bn) will be funded through an equity placement that has launched today.
The remainder of the deal will be paid through 11.7m Flutter shares valued at £133.50 ($178.46) apiece – Flutter’s share price when the market opened today.
Flutter acquired a majority stake in FanDuel in 2018, before its merger with the Stars Group to become the largest online gaming operator in the world. Chief executive Peter Jackson said the deal to acquire FanDuel was a major stepping stone in Flutter’s growth.
“Flutter’s initial acquisition of a controlling stake in FanDuel in 2018 has been transformational for the shape of the Group,” Jackson said. “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.
Flutter had an option to buy Fastball’s stake in the brandr in July 2023, but said the accelerated purchase allows Fastball certainty and offers immediate liquidity.
“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,” Jackson said.
The deal values FanDuel at $11.24bn, below rival DraftKings’ market capitalisation of $20.02bn. Flutter said the deal was less than fair market value, due in part to Fastball’s minority position in FanDuel and the certainty and liquidity benefits of obtaining payment sooner.
Flutter’s shares opened at £133.70 today on the London Stock Exchange, before rising to a high of £152.05 soon after the announcement.
In its announcement, Flutter said it anticipates the 14 markets in which FanDuel is currently live to be worth over $9bn at maturity.
Jackson added that FanDuel hopes to expand further in newly regulated states as they open for business.
“I would like to take this opportunity to thank our partners in Fastball for their tremendous support over the last two and a half years and for their ongoing commitment to Flutter as soon-to-be shareholders in the wider group,” Jackson explained.
“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.”
The remaining 5% of FanDuel is held by land-based operator and FanDuel market access partner Boyd Gaming.
In addition, Fastball will waive its right to receive a payment for the increase in fellow US-facing Flutter brand Fox Bet’s market value. Fastball held the rights to a payment worth 11% of any such increase in value between May 2020 and July 2023.
The deal is subject to shareholder approval but is expected to be completed before the year’s end.
Goldman Sachs International and J&E Davy will conduct the share placement to fund the deal.