LONDON: Gambling firm Paddy Power Betfair plc announced Wednesday a definitive agreement to combine its US business (Betfair US) with FanDuel, a leading US daily fantasy sports operator.
The move follows a ruling by the US Supreme Court earlier this month overturning a 1992 legislation that banned sports betting in most American states.
Fan Duel, which was founded in Scotland, allows sports fans to gamble on fantasy sports leagues and contests in American sports based around NFL American Football, NBA basketball, MLB baseball and NHL ice hockey.
There are an estimated 30 million adult fantasy sports players in North America.
The transaction strengthens Paddy Power’s opportunity to target the prospective US sports betting market through the addition of a strong brand, large existing customer base and talented team, the company asserted.
Transaction details
Under the agreement, the group will contribute its existing US assets along with $158 million of cash. This cash contribution will be used to pay down existing FanDuel debt (net debt of $76 million at 31 March) and fund working capital of the combined business.
Upon completion of the transaction, the group will own 61% of the combined business, with existing FanDuel investors owning 39%. All material FanDuel investors are rolling their investment into the combined business. A mechanism has also been agreed to take the group’s ownership of the business to 80% after three years and 100% after five years, consisting of call and put options at the prevailing market valuations.
The group will have operational control of the business, which will become a fully consolidated subsidiary, and will have the right to appoint the CEO and a majority of the board of directors. Existing FanDuel investors will continue to have board representation.
The transaction is subject to customary regulatory and anti-trust reviews for transactions of this nature and is expected to complete in Q3 2018.
Financial details
On a proforma basis, including expected synergies but before investment in sports betting, the combined business is currently operating at broadly EBITDA breakeven. The transaction is not expected to have a material impact on the group’s 2018 underlying EBITDA.
Peter Jackson, CEO of Paddy Power Betfair, commented: “We are excited to add FanDuel to the group’s portfolio of leading sports brands. This combination creates the industry’s largest online business in the US, with a large sports-focused customer base and an extensive nationwide footprint.
The group has leading sports betting operating capabilities globally and strong operations on the ground in the US. Together with our substantial financial firepower, we believe we are now well placed to target the prospective US sports betting opportunity.”
Matt King, CEO of FanDuel, noted: “We are excited to bring these two great businesses together. The combination of brands and team, along with a shared culture and vision for the future, creates the leading gaming destination for US sports fans.”
Paddy Power Betfair entered the US fantasy sports market last year with the acquisition of Draft, a US fantasy sports site, for $48 million (£35 million), BBC reports.
The Dublin-based firm already has a US division, which includes the TVG Network, a horseracing TV channel and an online betting network which is active in 35 states.
Paddy Power also has an online casino and a horseracing betting exchange in the state of New Jersey.
