Fox obtains the right to buy a stake in FanDuel, but not at the price he wanted

The FanDuel Inc app.

Andre Harrer | Bloomberg | Getty Images

Fox secured the right to buy an 18.6% stake in sports betting company FanDuel Group from its parent company Beatbut not to the valuation, according to a decision rendered Friday by a New York arbitrator.

If Fox were to exercise its equity option, it would be at a price of at least $3.72 billion.

The decision ends the more than year-long lawsuit between the two companies over the valuation of FanDuel, which has become one of the leading sports betting platforms in the United States alongside the services of DraftKings, Caesars and MGM.

The price Fox should pay is based on FanDuel’s valuation of $20 billion, according to the ruling. Flutter, which owns nearly 95% of FanDuel, acquired a 37.2% stake in the company in December 2021 for an implied valuation of $11.2 billion. Fox had argued that the price should be based on this threshold.

Yet Fox could have been ordered to pay a lot more. A March 2021 estimate by Jeffries analysts said FanDuel could be worth up to $35 billion, which would value a stake of almost a fifth at nearly $6 billion.

“Fox is satisfied with the fair and favorable outcome of the Flutter arbitration,” the company said in a statement following the ruling. “Fox has no obligation to commit capital to this opportunity unless and until it exercises the option. This option on a significant stake in the United States online sports betting operation, market leader, confirms the tremendous value Fox has created as a pioneering media partner in the US sports betting landscape.”

Fox has a 10-year option to acquire the stake, which runs until December 2030. The arbitrator decided that there would be a 5% annual indexation on its purchase price, which means that the current price of a deal would be $4.1 billion.

“Today’s decision confirms the confidence we had in our position on this issue and provides certainty about what it would cost Fox to invest in this business, should they choose to,” the CEO said. of Flutter, Peter Jackson, in a statement.

Fox said that under the arbitration award, Flutter cannot pursue an IPO for FanDuel without Fox’s consent or the arbitrator’s approval. However, Flutter disputed that claim and later told CNBC in a statement that Fox had no hold on any potential FanDuel IPO, should it occur.

Flutter had previously considered taking FanDuel public, taking advantage of the booming sports betting market.

Sports betting has continued to grow in the United States as more states introduce legal online sports betting – as of November 1, 33 states allow some form of sports betting, with California having two measures on its report card vote to legalize it.

It also boosted revenue. Commercial sports betting revenue nationwide through August was $3.97 billion, up nearly 70% year-over-year, according to data from the American Gaming Association.

But this continued growth has not benefited all public sports betting companies. DraftKings stock posted its worst drop ever on Friday after the company reported monthly customer growth below estimates, even as it revised its revenue forecast upward. DraftKings, which is down more than 59% year-to-date, is now valued at just over $5 billion.

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