The US gambling industry has seen many key changes in the past few years. With an increasing number of sportsbooks opening, the race has been on to see which gambling company will have the most impact. FanDuel is the clear leader, and they are 95 percent owned by Flutter.
December 2020 saw the Fox Corporation backing a £1.1 billion share sale by Flutter Entertainment. They are the parent company of well-established bookmakers Betfair and Paddy Power. The aim of the share sale was to allow Fox to get more shares in FanDuel, who have been expanding their business. They have had great success in the fantasy sports business but are now branching out and launching sportsbooks too.
Peter Jackson is the chief executive of Flutter and in 2018 saw a fantastic opportunity arise. It had been the case in the US that the federal government ruled on whether states could legalize gambling. A landmark US Supreme Court judge ruled that it should be the individual states who make that decision.
This has led to many (but not all) US states legalizing betting, especially on sport. The Flutter chief executive swiftly saw the business opportunity that was being created and an initial stake in FanDuel was attained.
As seen on gamble USA, all has not been going well between Fox and Flutter. Fox took legal action against a company they describe as a “partner.” They have a 2 per cent stake in Flutter after Flutter’s merger with The Stars Group (TSG). There had been some co-operation between Fox and TSG with Fox Bet being launched. Fox has an option to get an 18.6 per cent stake in FanDuel but aren’t happy with the price of achieving that.
The Murdoch family is keen to now take up that FanDuel option but not at the price that is on the table. Jackson is not happy with this and is insisting that Fox pay the “fair market value” of the stake. That is to be established this month by at least two investment banks.
Deciding on a valuation isn’t an easy task with some differing amounts currently in play. One figure for Fox to pay is £3 billion, another has it at £1.56 billion, a fair gap indeed. It’s not surprising that the dispute has had to go into arbitration in front of a New York judge. This is unlikely to be a swift process and could even last into the second half of 2022.
March of this year saw Flutter say they were thinking of an initial public offering of FanDuel. That looks a good decision to take considering how successful the gambling industry is becoming in the USA. It would also see them take advantage of a difference between how listed companies act in the USA compared to Europe with a traditional premium.
This looks unlikely to happen while the arbitration process is going on. Some sources though say that the option that Fox has relates to the operating business of FanDuel, a subsidiary of a listed entity.
There are plenty of views on how this will all end. Some believe that Fox wants a merger between FanDuel and Fox Bet, the latter not doing as well as expected so may need a bit of a boost.
Again, this is something that Jackson isn’t that happy with. In March, he was critical of Fox Bet during an analysts’ conference. He spoke of the “struggles” that Flutter is having with the “quality” of Fox Bet product. Interesting times lie ahead as the companies try to come to some agreement.
