FanDuel co-founders lawsuit vs Flutter dismissed by New York court

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A New York State appeal court has dismissed a case filed by former FanDuel Co-Founders and shareholders that challenged the terms of FanDuel’s sale to Paddy Power Betfair (PPB) in 2018.  

Former FanDuel CEO and Co-Founder Nigel Eccles sought compensation from parties involved in the sale of FanDuel to PPB in 2018 for $465m. 

The case had initially been filed by Eccles at a Scottish court, where FanDuel incorporated its business and represented the interests of four of FanDuel’s enterprise co-founders including his wife Lesley Eccles (former CMO), Tom Griffiths (former CPO), and Rob Jones (corporate advisor).

The FanDuel founding team had departed the company at the time of PPB’s buyout to follow individual ventures, but asserted to have a “non-preferred share arrangement” that would reward them based on the operator’s future.

However, a five-judge NY panel deemed that the Eccles vs Shamrock Capital Advisors appeal had failed to make a valid legal claim under Scottish law, as they outlined that “under Scottish law directors’ duties are to the company but not to shareholders”.

Following the 2018 acquisition of FanDuel, PPB would rebrand to Flutter Entertainment and push for dominance in the US sports betting industry.

Eccles and the Co-Founders stated that Shamrock Capital Advisors and KKR “artificially suppressed” FanDuel’s valuation to ensure that certain shareholders would not be rewarded. 

The Scottish court order outlined that the claim sought a minimum of $120m in compensation and a further recalculation of their shareholdings to take into account FanDuel’s growth since 2018.

Flutter has defended its 2018 valuation of FanDuel, as the company made a $600m investment to merge FanDuel with its Betfair TVG racing unit, launching its US sportsbook division – that had no guarantee of market success.  

The original deal saw PPB take a controlling 61% stake in FanDuel for $158m, a transaction that was approved by the operator’s venture capital investors.  

Dealmakers stated that under the terms of the sale, holders of “non-preferred shares” could not be rewarded as preferential payouts had been reserved for FanDuel’s venture capital investors that had spent $450m financing the daily fantasy sports (DFS) operator. 

“This is a sweeping victory for our client, which confirms that the transaction was fundamentally fair and the proceeds were appropriately distributed,” commented Mark Kirsch from King & Spalding who represented FanDuel.