Fox Corporation challenges Flutter Entertainment over pricing of option to buy stake in FanDuel

Image source: Shutterstock

Fox Corporation and Flutter Entertainment will meet in court over the pricing of the former’s option to buy an 18.6% stake in the FanDuel Group this summer. The Murdoch-owned media organization argues that the pricing of the option should be the same as that which applied to Flutter’s deal with Fastball Holdings last December.

Flutter, which merged its US business with FanDuel in 2018, raised its FanDuel holding to 95% in the $14.18bn December deal. Fox, having helped get the transaction over the line, was given the option to buy 18.6% of FanDuel in July this year.

With that option to buy looming, Flutter has insisted that Fox must pay what it described as a fair market value above the price negotiated with Fastball Holdings in December which, it said, was agreed at a discount to the true value of the FanDuel business.

A marker has already been laid down by Flutter on the pricing of Fox’s option, with Chief Executive Peter Jackson stating during the firm’s earnings call last month that the price would be different from the Fastball valuation.  

With media interest in the dispute growing, Fox Corporation issued the following statement which read: “Fox Corporation has filed suit against Flutter to enforce its rights to acquire an 18.6% ownership interest in FanDuel Group—an American sports betting brand—for the same price that Flutter paid for that interest in December 2020. The suit was filed as an arbitration before JAMS in New York, NY by consent of the parties.”

By way of response, Flutter issued a statement of its own, saying: “Flutter notes the statement made by Fox Corporation with respect to a legal dispute between the two parties in relation to an option to acquire an 18.6% stake in FanDuel. 

“Under the terms of Flutter’s agreement with Fox Corporation, an arbitration mechanism was put in place at the time of The Stars Group merger announcement to be conducted in the event of a disagreement between the two parties relating to the option. That now being the case, such a process has been initiated by Fox.”

Outlining its objection to Fox’s approach, Flutter added: “FOX’s position that it has a right to acquire an 18.6% interest in FanDuel based on an $11.2bn valuation is incorrect. It would represent a windfall to Fox compared to the fair market valuation as of July 2021, to which the parties had previously agreed. Flutter will not allow Fox’s filing, which is without merit, to distract from its business and will vigorously defend its position in the arbitration.”

The Fox lawsuit had an immediate effect on Flutter’s share price, which fell 2% in early trading, and comes during a period of high investor expectancy for the US gaming market. DraftKings, for example, which listed via a SPAC merger last April, has seen its shares triple in value.