Flutter takes control of FanDuel in $4.2bn buyout

Flutter Entertainment has agreed a $4.2bn deal to acquire an additional 37.2% stake in US sports betting operator FanDuel, taking its total stake to 95%. Under the terms of the agreement, Flutter will pay $2.1bn in cash from its balance sheet and issue approximately 11.7 million new Flutter shares to Fastball. Fastball previously owned the FanDuel stake valued at a price of £133.50 ($188) per share. The price of the placing now values FanDuel at $11.2bn. Market access partner Boyd Gaming owns the remaining 5% in FanDuel. A portion of the purchase price will be paid via a £1.1bn ($1.45bn) share rights issue made to both institutional and retail investors, with shares priced at €0.09 ($0.11) per share. Goldman Sachs and Davy are acting as joint global co-ordinators and joint bookrunners in respect of the placement.

The deal terminates any Fastball interests in US-facing operator Fox Bet, another brand in the Flutter stable. This transaction was initially envisioned as part of the original purchase of FanDuel by Flutter back in May 2018. At that time, a mechanism was put in place to facilitate the sale of Fastball’s remaining 37.2% stake in FanDuel to Flutter in two tranches in July 2021 and July 2023 at prevailing market valuations. This mechanism contained constraints on the amount Flutter could be obliged to pay to acquire the stake, potentially leaving Fastball continuing to hold a minority share in the business for an indefinite period. However, this timetable has been accelerated to remove “considerable uncertainty” surrounding the future of the Fastball stake and with the aim of reducing shareholder complexity for the business. “In agreeing the terms of the transaction, Fastball is able to realise a considerable return on its original investment in FanDuel while trading the discount for price certainty, liquidity and an opportunity to expedite the payment it receives for its full stake,” Flutter said. Flutter will offer media partner Fox Sports the option to purchase 18.5% of FanDuel at “fair market value” in July 2021, under the same terms and valuation that would have applied to the original Fastball deal. Flutter CEO Peter Jackson said: “Flutter’s initial acquisition of a controlling stake in FanDuel in 2018 has been transformational for the shape of the group. “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. “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,” he added. Flutter highlighted a “material expansion” in its exposure to the US market as being one of the key motivators for the accelerated timescale, predicting the US states it goes live in by the end of 2021 to be worth more than $9.1bn in gross gaming revenue terms. This estimate would put the US almost on a par with the UK, Ireland and Australia markets combined. Flutter believes that for each additional 5% of the US population granted access to regulated sports betting, the sports betting market would grow by $850m, while the online gaming market would grow by $1.3bn at the same 5% rate. Fox Corporation CEO and executive chair Lachlan Murdoch said: “We are delighted to participate in this capital raising. Maintaining our ownership stake in Flutter signifies our long-term commitment to Flutter, and ongoing confidence in management’s ability to execute against the fast growing US opportunity. “Fox’s audiences have proven to be highly engaged with free-to-play and wagering content and we are excited to offer them access to products from Flutter’s market leading stable of US brands,” Murdoch added. Shareholder approval of the deal is expected by the end of December. Flutter has confirmed proceeds of £1.1bn ($1.45bn) were raised from the share placement, with 8,004,503 new ordinary shares in the operator being bought at a price of €155.44 ($188.2) per share, representing 5.2% of the company’s total share capital. US-based Capital Group, which is already a substantial shareholder in Flutter, bought an additional 1,441,038 new shares in the business at a total consideration cost of £202m (($268m). Hailing a successful placement, Flutter said it was pleased by the “strong support” in the business from both new and existing shareholders.