Flutter Increases Stake in FanDuel

Flutter Entertainment is accelerating its purchase of 37.2 percent of FanDuel from Fastball. If approved, the company's stake will increase to 95 percent, with the remainder held by Boyd Gaming. The $4.2 billion purchase will expand FanDuel in the U.S. sports betting market.

Flutter Entertainment agreed to pay $4.2 billion to expand its stake in the sportsbook giant, FanDuel. The agreement, funded with cash and stock, buys out Fastball’s 37.2 percent stake. If approved by shareholders, Flutter will own 95 percent of FanDuel.

Boyd Gaming will own the balance. FanDuel runs eight retail locations at Boyd properties in Iowa, Indiana, Illinois, Mississippi, and Pennsylvania. “We view Flutter as a long-term strategic partner and intend to maintain our ownership stake and our strategic partnership,” Boyd spokesman David Strow said in an email Thursday.

FanDuel currently operates sports betting in nine states with different casino partners including Boyd: Colorado, Iowa, Illinois, Indiana, Michigan Tennessee, West Virginia, Pennsylvania, and New Jersey, according to CDC Gaming Reports.

Macquarie Securities gaming analyst Chad Beynon said Flutter’s deal suggests a FanDuel valuation of $11.2 billion, with Boyd’s 5 percent equity stake worth roughly $560 million.

When Flutter, Flutter, which owns European iGaming properties Paddy Power, Betfair and PokerStars, bought shares of FanDuel in 2018, the valuation was about $559 million, according to Bullpen Capital founder and managing director Paul Martino. Flutter had the option to buy the rest of the company. According to Bloomberg, Dublin-based Flutter overtook GVC Holdings in market value after buying Canada’s The Stars Group earlier this year.

“The fact that they had to acquire at near close to market value, I’m sure all of us early investors can breathe a bit of a sigh of relief as the result of that,” Martino said.

Clearly Flutter came out a winner, according to Justin Birnbaum at Forbes. The original deal had Flutter buying Fastball’s interest in 2023, but spent more to fast-track the transaction to get to reap the rewards of with the growth of sports betting in the U.S.

Sports wagering operates in 19 states and Washington, D.C. The industry drew $13 billion from American bettors, according to the American Gaming Association. With six more states passing bills to legalize and two others with active bills on the floor of state legislatures, that number is poised to grow—and FanDuel along with it.

“Our number one position in the crucial U.S. market is built on many of the assets we acquired through that transaction, supported by the broader Group’s capabilities. Our intention has always been to increase our stake in the business and I’m delighted to be able to do so earlier than originally planned and at a discount to its closest peer,” Flutter CEO Peter Jackson added.

FanDuel has formed partnerships with Fox Bet, Turner Sports and multiple professional teams such as the Detroit Pistons and the New York Giants. Its gross gaming revenue and market share are roughly 1.5 times and 1.7 times, respectively, as much as its closest competitor.

Still, FanDuel’s valuation is just over a fourth of DraftKings’ approximately $40.1 billion market capitalization, according to MarketWatch. However, Martino says this is a factor of Flutter’s complex ownership structure, overseas operations and ultimate liquidity.

“Sports betting is still relatively young as an industry, but we’ve managed to build a great leadership position being the first operator to go north of $1 billion of gross gaming revenue that we’re projected to do this year,” FanDuel CEO Matt King said. “And this transaction is really about accelerating Flutter’s investment in the U.S. market. The fact that you now have states who have been live for a couple years just makes it easier for new states to see, in living color, all the good things that happen when you do this.”

King said he expects the company’s online sportsbook to be available in 14 states and its online gaming products to be in four states, all by the end of 2021.

FanDuel’s rollout in Michigan is currently live in retail, with online gaming coming in a few weeks. The company expects to expand to Virginia in the first quarter of 2021. Flutter projects that its potential gross gaming revenue in the states it operates in could be worth as much as $9.1 billion at maturity.

Martino says Flutter could see 400 percent to 500 percent returns over the next decade as states continue to legalize sports gambling. So even if Flutter sacrificed on price, its high-cost U.S. land grab is worth every penny, Birnbaum said.

“These are going to be behemoth companies that are going to rival MGM and rival Caesars over the next decade,” Martino says. “The fact that these were little startup companies that started in fantasy sports, it’s amazing that they’re going to be topplers of some of the biggest casino companies in the U.S.”