Analysis

Extra FanDuel slice delivers Flutter U.S. optionality

Flutter Entertainment CEO Peter Jackson said the acquisition of a 37.2% slice of FanDuel delivers scale and ties up its U.S. footprint.

The deal costs $4.1bn and consolidates its leadership position in the U.S sports betting market.

Discussing the deal with industry analysts, Jackson emphasized that the acquisition of the near entirety of FanDuel was always intended as part of Flutter’s U.S. strategy.

“We have always controlled FanDuel since acquisition and have always been pretty aggressive,” he said. 

“This is clear from what we have done in New Jersey up to now and more recently when we launched in Tennessee in November. 

“We are expanding but also bringing discipline to how we execute our strategy.”

He added that the transaction confirms its ambitions. “It also gives us flexibility, scale and reduces complexity in our corporate US structure,” he said.

“FanDuel is the highest quality online asset and the deal has been done at a major discount.

“The transaction delivers best value for our shareholders.”

Best value

Jackson explained that the $4bn price tag also removed any volatility linked to valuations in the U.S. online gaming sector. 

The deal values FanDuel at $11bn, which Jakcson said represented a discount to market leader DraftKings. 

DraftKings’ current market value is close to $20bn.

Flutter has forecast $1bn in revenues for 2020, its most recent update showed it had recorded $850m revenues and had 43% market share.

This compares with DraftKings’ $540m-$560m in revenues and 25% share of market so far in 2020.

Flutter’s share price had risen 5.6% and group market value was $29.6bn at close of business Thursday.

Jackson added that the deal would be financed through a combination of $2bn in cash and the issuance of 11.7 million ordinary shares. The group will also conduct a $1.48bn equity placing.

The agreement also simplifies FOX Bet’s position within the group. 

Flutter will offer FOX Sports the option to purchase 18.5% of FanDuel “at fair market value in July 2021”.

FanDuel’s market access partner Boyd Gaming retains its 5% share of the company.

Scale and maturity  

Jackson added that individual states had to be given time to mature as online gambling markets.

New Jersey smashed sports betting records with $803m in handle and $58.5m in revenues in October. 

FanDuel took $29.8m of that revenue, more than twice the $14.6m generated by second-placed DraftKings.  

Said Jackson: “New Jersey was first (in sports betting) in Q3-Q4 2018 and there have now been three full NFL seasons. It’s the proof point of what we thought was going to happen. 

“It’s where we want it to be and the market is still growing.”

“We will communicate on how maturing states are performing, but only once we get through the ‘J curve’ of growth, when we will have a clearer idea of the long-term contributions.”

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