Shares in Flutter Entertainment increased to a record high this week after it announced a deal to buy a 37.2% stake in FanDuel for $4.18 billion. Flutter initially purchased a controlling stake in FanDuel back in the summer of 2018, just after the US Supreme Court overturned a federal ban on sports wagering. It has since turned FanDuel into the market leading sportsbook in several states, including New Jersey and Pennsylvania.
Flutter, which owns Paddy Power, Betfair, Sky Bet and PokerStars, will increase its stake in FanDuel to 95% after tying up the $4.18 billion deal. The 37.2% stake is owned by Fastball Holdings LLC, the initial shareholders of FanDuel. They agreed to accept a discounted price on their stock due to “the provision of price certainty and liquidity”.
Fastball will receive $2.088 billion in cash and 11.7 million in new ordinary shares in Flutter as part of the deal. It values FanDuel at $11.2 billion, which is considerably lower than its closest peer, DraftKings, so Flutter pointed out that it was getting a great deal. The group has come a long way since launching as Paddy Power in Dublin back in 1988, and it is now the world’s largest online gaming firm.
“Flutter’s initial acquisition of a controlling stake in FanDuel in 2018 has been transformational for the shape of the group,” said chief executive Peter Jackson. “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.”
Flutter raised £1.1 billion by placing 8 million new ordinary shares at a price of 14,000 pence per placing share this week. The capital will go towards increasing its stake in FanDuel and new customer acquisition.
The shares account for 5.2% of the issued share capital in Flutter. Fox Corporation was among the existing shareholders to participate. It owned a 4.99% stake in The Stars Group, which became a 2.6% stake in Flutter after Flutter purchased TSG last year.
“We are delighted to participate in this capital raising,” said Lachlan Murdoch, executive chairman and chief executive at Fox Corporation. “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.”
Flutter also has the Fox Bet brand in its portfolio, giving it a strong chance of becoming the overall market leader in the United States, amid competition from William Hill, DraftKings and BetMGM, a joint venture between MGM Resorts and Ladbrokes owner GVC Holdings.
A major review of UK gambling laws will be launched next week. The Department for Digital, Culture, Media and Sport is leading the review, which could overhaul every area of gambling law. The Guardian revealed that lawmakers will consider banning sports sponsorship and limiting online casino stakes.
Last year, retail betting shops were ordered to reduce the maximum stake per spin from £100 to £2 on virtual roulette machines, known as Fixed Odds Betting Terminals. However, punters can visit virtual casinos online and stake £100 or more. That could change following the review, which will consider imposing limits on online stakes, prizes and even spin speeds.
Some legislators are pushing for tougher affordability checks, a stronger testing regime for new products, a sports sponsorship ban, greater legal redress for wronged punters and a mandatory levy to fund addiction treatment. The Gambling Commission of Great Britain, created by the Gambling Act 2005 under Tony Blair’s government, is the most respected regulator in the global gaming industry. It could be totally transformed by the review.
Industry group the Betting and Gaming Council, whose members include Bet365, William Hill, Flutter, GVC, 888, Betfred, Betway, Unibet owner Kindred Group and many more heavyweight gaming firms, said tighter controls could play into the hands of illegal, unregulated betting sites that prey on vulnerable punters.
“It is important that the review is evidence-led and strikes the right balance between protecting the vulnerable, while not spoiling the enjoyment of the estimated 30 million people who enjoy a bet at least once a month – the vast majority of whom do so perfectly safely – and driving them into the arms of the unregulated online black market,” said a BGC spokesperson.