Flutter wins dispute with Fox over FanDuel valuation

Flutter Entertainment has won a long-standing legal dispute with Rupert Murdoch’s Fox, relating to the fair market valuation and potential purchase of a stake in
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Flutter Entertainment has won a long-standing legal dispute with Rupert Murdoch’s Fox, relating to the fair market valuation and potential purchase of a stake in FanDuel

After a lengthy dispute, Fox has been forced to pay a $4.1bn fee for an 18.6% of FanDuel, should it wish to take up its option which expires in December 2030.

Following proceedings dating to April 2021, a US court has ruled that Fox’s option to purchase an 18.6% stake in the Flutter-owned sportsbook and online casino app must be in line with a $20bn valuation, rather than the $11.2bn previously implied valuation. 

Fox first opened the arbitration last April, when the company questioned the market valuation of FanDuel from December 2020, when Flutter purchased the remaining 37.2% stake of shares from FastBall Holdings. 

When the London-listed gambling group purchased those shares, it was at an ‘implied valuation’ of $11.2bn.

However, the tribunal ruled that the fair market value of FanDuel at that time was $20bn, based on ‘the valuation submissions of both Flutter and FOX, where a full range of valuation methodologies were applied, including discounted cash flow’. 

As a partner of Flutter, Fox holds a 10-year option to purchase the 18.6% stake in FanDuel, beginning December 2020, with an annual compounding adjustment of 5%. 

Following the tribunal ruling as of November 4, the option price has been set at $4.1bn, comprising the $3.7bn exercise price in addition to the 5% annual increases.

Further proceedings brought by Fox saw a claim that ‘Flutter had failed to provide commercially reasonable resources to the operation of FOX Bet’, which was denied by the tribunal. The tribunal sided with Flutter again, determining that ‘commercially reasonable resources have been provided to Fox Bet.’

Flutter CEO, Peter Jackson, commented on the developments: “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 remains 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 final matter yet to be settled is that of a potential FanDuel IPO, which considers if and under what conditions Fox would be entitled to participate. 

Flutter agreed that it would not pursue a FanDuel IPO until the matter has been resolved or if both parties reach an agreement on the matter. 

A final decision on the status of a potential FanDuel IPO and Fox’s potential role in it is expected in ‘early 2023’.

Also reacting to the tribunal’s determination, Fox released the following statement: “Fox is pleased with the fair and favorable outcome of the Flutter arbitration. Flutter cannot pursue an IPO for FanDuel without Fox’s consent or approval from the arbitrator. 

“Fox has a 10-year call option that expires in December 2030 to acquire 18.6% of FanDuel for $3.72bn, with a 5% annual escalator.  Fox has no obligation to commit capital towards this opportunity unless and until it exercises the option.  

“This optionality over a meaningful equity stake in the market-leading US online sports betting operation confirms the tremendous value Fox has created as a first mover media partner in the US sports betting landscape.”