- Flutter wins Fanduel arbitration ruling
- Fox has to ‘pay-up’ to exercise its 10-year option
- IPO uncertain until tribunal rules in 2023
Global gambling company Flutter Entertainment (FLTR) said an arbitration hearing has ruled in its favour valuing US fantasy betting company FanDuel at $20 billion at December 2020 when the company announced the acquisition of a 37.2% stake.
The ruling means Flutter’s US joint-venture partner Fox has until December 2030 to exercise an option to acquire an 18.6% stake in Fanduel, after which the option expires.
The $20 billion valuation is also subject to a 5% annual compounding value adjustment which means as of 4 November 2022 the option price is $4 billion or just over 10% higher than the $3.7 billion price two years ago.
The favourable outcome saw Flutter’s shares gain 3% to £118.70 on Monday.
WHY DID FOX CHALLENGE?
Fox initiated an arbitration process on 7 April 2021 over the legal terms of its 18.6% stake in Fanduel and related issues.
The bone of contention is that a $20 billion valuation for Fanduel is much higher than the implied $11.2 billion valuation that Flutter agreed for its 37.2% stake from Fastball.
In cases such as this the dispute goes to an arbitration panel which reviews the facts and determines a ‘fair market price’. The panel reviewed submissions from both parties where ‘a full range of valuation methodologies were applied, including discounted cash flow.
Fox claimed Flutter failed to provide ‘commercial reasonable’ resources to allow the proper functioning of Fox Bet which the tribunal rejected.
Flutter chief executive Peter Jackson commented: ‘Today's ruling vindicates the confidence we had in our position on this matter and provides certainty on what it would cost FOX to buy into this business, should they wish to do so.
‘FanDuel is winning in the US market and the clear #1 operator, a position driven by its exceptional market leading product and efficiency in acquiring customers at scale. The team remain focused on maintaining our leadership position and we look forward to updating the market on our progress at our US capital markets day on 16th November.’
THE STARS GROUP
Paddy Power, Betfair and Fanduel owner Flutter merged with TSG in 2019 which brought several brands under its wing including Sky Betting and Gaming, PokerStars, Full Tilt, Fox Bet and BetEasy.
Fox retains the right to acquire up to 50% of TSG (The Stars Group) US which it can exercise only if the business is licensed.
The tribunal determined that should Fox fail to get licensed both parties can terminate their agreement in relation to Fox Bet in August 2023.
If this happened Flutter would retain ownership of PokerStars US and Super6, while the use of the FOX Bet brand name would reside with FOX.
FOX HOLDS CARDS IN IPO
The final matter which the tribunal has yet to decide upon is what happens if Flutter proceeds with an IPO (initial public offering) of Fanduel. A decision is expected in early 2023 until which time Flutter said it agreed not to IPO the business.
