Fox settles FanDuel lawsuit against Flutter Entertainment

Posted on: Nov 4, 2022 7:03 am.

Last updated on: November 4th, 2022, 07:03 am.

A ruling returned today by New York’s Judicial Arbitration and Mediation Services (JAMS) in favor of Fox Corp. (NASDAQ:FOXA) announced, paving the way for the media company to acquire 18.6% of FanDuel.

fox flapping
The FanDuel logo on a mobile phone. Fox was awarded the right to acquire an 18.6% stake in the company after a lawsuit against Flutter Entertainment. (Image: Flutter)

The decision, which ends a long-running legal battle by Fox against FanDuel parent company Flutter Entertainment (NYSE:flutter), allows the broadcasting giant to acquire a previously agreed 18.6% stake in the sportsbook for $3.72 billion .

FOX has a 10-year call option, expiring in December 2030, to acquire 18.6% of FanDuel for $3.72 billion with a 5% annual escalation,” the media outlet said in a statement. “FOX has no obligation to provide capital for this opportunity unless and until it exercises the option.”

The JAMS lawsuit was filed by Fox more than 18 months ago and arose out of a disagreement between that company and Flutter over the price at which the media giant could acquire 18.6% of FanDuel. Flutter was aiming for what it viewed as fair market value, while Fox betrayed the price its parent company paid — $4.175 billion in December 2020 — when it bought investment firm Fastball’s 37.2% stake in FanDuel.

Decision is a coup for Fox, still a win for Flutter

Based on the above, the arbitration is a win for Fox as it allows it to incrementally buy into the largest US sportsbook at a fair valuation.

“FOX is pleased with the fair and positive outcome of the Flutter arbitration. Flutter cannot seek an IPO for FanDuel without FOX approval or the arbitrator’s approval,” the broadcaster added in the statement.

However, Flutter is not left out in the rain. Fox buys into FanDuel at a $20 billion valuation, while Flutter’s company is around $24 billion. Additionally, FanDuel is by far the largest domestic online sportsbook, with a market share roughly equal to that of BetMGM and DraftKings (NYSE:DRAFT) combined.

Additionally, the lawsuits were seen as an obstacle to Flutter’s plans to spin off part of FanDuel to public investors via a US listing. That option could now come back to the table sometime in 2023.

“This opportunity for a significant equity investment in the market-leading US online sportsbook validates the tremendous value that FOX has created as the premier media partner in the US sportsbook landscape,” noted Fox.

Currently, Flutter owns 95% of FanDuel, while Boyd Gaming (NYSE:BYD) owns the rest.

Fox/Flutter Story

Fox is also a Flutter investor. It owns 2.5 percent of the gaming company. This relationship dates back to Fox selling Sky Bet to The Stars Group (TSG) for $4.7 billion in 2018. In 2020, Flutter paid $12.2 billion for TSG, which then owned Fox’s FOX Bet unit.

As of this writing, Paddy Power has yet to issue a statement on the JAMS ruling, but Investor Day is scheduled for November 16 and the issue is likely to be raised at that event.

Bottom Line: FandDuel’s $20 billion valuation is a win-win-win for Boyd, Flutter and Fox, as that’s almost four times DraftKings’ market cap as of today’s US close.

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