FanDuel to Merge with Paddy Power Betfair US Operations
After the merger Paddy Power Betfair will have 61% ownership of the combined business, while FanDuel Investors will own 39%.
The fantasy sports company FanDuel Inc, which was founded in Scotland, has agreed to merge with gambling firm Paddy Power Betfair PLC (PPB). The merger has come at an opportune moment in light of the US Supreme Court’s recent ruling, which overturned 1992 legislation that banned sports betting in most states.
This reversal has now opened the door to legal sports betting across the country. According to Barclays, the US gambling market could be worth a staggering $10 billion in net revenues to gambling operators, this excludes funds returned to customers in prizes.
Due to FanDuel’s 40% market share of the US daily fantasy sports market, PPB will now be able to take advantage of this perk and roll-out its services much quicker. In 2017, FanDuel had revenue of $124 million and 1.3m active customers. Peter Jackson, boss of PPB said that this merger would create the largest online business in the US gambling industry. FanDuel Cheif Executive, Matt King said that the deal will create the leading gaming destination for US sports fans. It is expected that the deal will be concluded in the third quarter this year.
PPB has said that it will pay down existing FanDuel debts, contributing its existing US assets as well as $158m to the company. As of March, FanDuel’s net debt stood at $76m. Existing FanDuel investors will own 39% of the combined business, however, as per the agreement PPB has the option to boost its stake to 80% after a period of three years and then to 100% after five years.
PPB will control the business, which will become a subsidiary. According to PPB as of December 2017, its US operations gross assets were worth $612m. FanDuel’s founders, Lesley Eccles, Tom Griffiths, Rob Jones and Chris Stafford (who have all exited the business), stand to receive a significant sum of cash from the sale as they all retain large shareholdings in the company. Previously, they have said that if the sale went through the would be looking to reinvest back into Scotland’s technology sector.