Global sports betting and gaming group Flutter has entered into a conditional agreement to acquire the entire 37.2% interest in FanDuel, currently held by Fastball, for $4.175bn subject to Flutter shareholder approval.
A circular will be posted to shareholders in due course to convene an extraordinary general meeting, which is expected to take place prior to the end of December 2020.
According to the firm, the transaction will accelerate the buy-out of its minority investors, taking Flutter’s stake in FanDuel from 57.8% to 95% and materially increasing its exposure to the US market. It also affords an opportunity to secure a stake in FanDuel at a discount to the intrinsic fair value, as well as a discount to its closest peer.
The discount to fair market value, said the firm, reflects a number of factors including Fastball’s minority position in FanDuel, the provision of price certainty and liquidity to Fastball as well as allowing it to expedite the payment it receives for its full stake.
Flutter added that the transaction removes considerable uncertainty with respect to buyout obligations of Fastball’s stake and simplifies stakeholder arrangements, increasing Flutter’s flexibility to optimize US structure over time. Moreover, the move terminates Fastball’s economic interest in FOX Bet.
Consideration for the transaction is expected to be satisfied through a combination of $2.088bn in cash and the issue of approximately 11.7m new Flutter ordinary shares directly to Fastball. The cash element will be funded through cash on balance sheet and an equity placing to raise approximately £1.1bn.
Commenting on the transaction, Chief Executive Peter Jackson said: “Flutter’s initial acquisition of a controlling stake in FanDuel in 2018 has been transformational for the shape of the group. 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. I would like to take this opportunity to thank our partners in Fastball for their tremendous support over the last 2½ years and for their ongoing commitment to Flutter as soon-to-be shareholders in the wider group.
“We look forward to continuing to grow our US business, alongside our key media partner FOX, as further states move to regulate sports betting and gaming.”
Lachlan Murdoch, Executive Chairman and CEO of Fox Corporation, said: “We are delighted to participate in this capital raising. 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. FOX’s audiences have proven to be highly engaged with free to play and wagering content, and we are excited to offer them access to products from Flutter’s market leading stable of US brands.”