Fox wins the right to buy a stake in FanDuel, but not at the price he wants

The FanDuel Inc. app.

Andrew Harrier | Bloomberg | Getty Images

Fox Acquired the right to purchase an 18.6% stake in sports betting company FanDuel Group from the parent company flutterbut not on evaluation, according to a ruling on Friday from an arbitrator in New York.

If Fox exercises its option to acquire the stake, it will be at a price of at least $3.72 billion.

The decision ends a lawsuit that has lasted more than a year between the two companies over the evaluation of FanDuel, which has emerged as one of the leading sports betting platforms in the United States along with services from kingsAnd the Caesar And the MGM.

The price Fox will have to pay depends on FanDuel’s $20 billion valuation, according to the ruling. Flutter, which owns approximately 95% of FanDuel, acquired a 37.2% stake in the company in December 2021 with an implied valuation of $11.2 billion. Fox argued that the price should depend on this limit.

However, Fox could have been asked to pay much more. Analysts at Jefferies said in March 2021 that FanDuel could be worth as much as $35 billion, which would estimate nearly a fifth of the stake at nearly $6 billion.

“Fox is pleased with the fair and positive outcome of the Flutter arbitration,” the company said in a statement following the ruling. “Fox has no obligation to allocate capital towards this opportunity unless you exercise this option. This optionality underscores the meaningful ownership share in the market driving the online sports betting process in the US the tremendous value that Fox has created as a premier media partner in the sports betting scene.” American”.

Fox has a 10-year option to acquire the stake, which runs through December 2030. The arbitrator ruled that there would be an annual sliding scale of 5% over the purchase price, meaning the current transaction price would be $4.1 billion.

“Today’s decision demonstrates the confidence we have in our position on this matter and provides certainty about the cost of Fox to buy into this company if they so desire,” Flutter CEO Peter Jackson said in a statement.

As part of the arbitration award, Fox said, Flutter cannot pursue the FanDuel IPO without Fox’s consent or the consent of the arbitrator. However, Flutter disputed this claim and later told CNBC in a statement that Fox had no ban on any potential FanDuel IPO, should that happen.

Flutter had previously considered bringing FanDuel to the public, taking advantage of the booming sports betting market.

Sports betting has continued to grow in the US as more states bring legal sports betting online – as of November 1, 33 states allow some form of sports betting, with California having two measures to legalize it.

This has resulted in higher revenues as well. Commercial sports betting revenue nationwide through August was $3.97 billion, up nearly 70% year over year, according to data from the Gaming Association of America.

But this continued growth has not benefited all public sports betting companies. DraftKings stock posted its worst ever drop on Friday after the company reported monthly customer growth that was below estimates even as it revised its revenue forecast upward. DraftKings, which is down more than 59% year-to-date, is now valued at just over $5 billion.

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