Flutter Increase in Its Ownership Stake in FanDuel Might Lead to a US Spin-off
Upon the announcement of their ownership increase in FanDuel in a $4.18 billion deal, Flutter’s interest in the US might see the possibility of an IPO.
Flutter, who had bought a 58% stake in FanDuel as far back in 2018, has with this deal secured another 37% ownership stake in the company, summing its ownership stake to 95% of FanDuel, leaving Boyd Gaming with a 5% stake.
The deal will see the London-listed operator pay $2 billion in cash while paying off the remaining $2.18 billion in 11.7 million Flutter ordinary shares. This announcement saw an increase of Flutter shares at the London Stock Market by 12%, regardless of the dilution.
Media Giant Fox, who owns a 2.6% stake in Flutter, has been afforded an option to buy more stake in FanDuel by next year July, up to 18.5%. They played a part in the equity raise, but there are no financial specifics as regards the level of their involvement. The Fox CEO, Lachlan Murdoch, said that they were excited to have participated in the capital raising and that maintaining their ownership stake in Flutter goes to show their long term commitment and confidence in Flutter.
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Will this Deal Lead to a US Spin-Off?
The 2018 deal afforded Flutter the chance to acquire a further 37% stake in FanDuel but in two stages. One being in July 2021, and then another in July 2023 at the prevailing market valuations. But the early investors of Flutter, FastBall, in exchange for price certainty and liquidy, apparently took the deal now at a reasonable discount.
The CEO of Flutter, Peter Jackson, said that it has always been the intention of the company to increase its stake in FanDuel and that they are excited to have been able to do exactly that earlier than initially agreed, at a discounted rate.
Flutter stated that the deal saw to FanDuel being valued at $11.2 billion, with a discount of 40% as regards the $20.3 billion value attached to their competitor, DraftKings.
With FanDuel business having a broader product spectrum and brand footprint than their rival, DraftKings. It begs the question of why Fastball acquired FanDuel at such an exit price. Jackson responded to that by saying that Fastball was keen on avoiding being the minority shareholder in an illiquid asset.
It is expected that this new ownership structure would make it a lot easier for Flutter to list the company in the US.
FanDuel’s Past and Current Worth
Being the largest operator in the US sports betting market, FanDuel has a 46% market share of online sportsbooks during Q3 and 29% of total online gambling share in the US.
During the original sale to Flutter, FanDuel was valued at about $558 million, which shows a massive difference from the $11.2 billion valuations it is pegged at now.
The co-founder, Nigel Eccles, and some other early employees are disputing this valuation in court, with their first hearing held last week.
It will, however, take some years for a final verdict to be reached.