Paddy Power Betfair has confirmed the rumors that it was working to acquire U.S. daily fantasy sports giant FanDuel by announcing an agreement to combine its U.S. operations with the DFS company.
The move will strengthen Paddy Power’s U.S. presence as it plans to enter the newly formed sports betting market in the country after the U.S. Supreme Court overruled a federal ban on sports betting. The company said it is aligning itself with “a strong brand, large existing customer base and talented team.”
Paddy Power Betfair said the move creates the No. 1 U.S. online operator with more than 7 million registered customers across 45 states.
“We are excited to add FanDuel to the group’s portfolio of leading sports brands,” said Paddy Power Betfair CEO Peter Jackson in a press statement. “This combination creates the industry’s largest online business in the U.S., 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 U.S. Together with our substantial financial firepower, we believe we are now exceptionally well placed to target the prospective U.S. sport betting opportunity.”
FanDuel has been preparing its own sports betting platform in anticipation of the Supreme Court ruling.
“FanDuel and Betfair US share an enthusiasm for innovation and, as a result of today’s announcement, are prepared to lead the charge into the U.S. sports betting market,” said FanDuel CEO Matt King. “The combination of our brands and team, along with a shared culture and vision for the future, will allow us to create the leading gaming destination for sports fans everywhere.”
FanDuel is thought to control about 40 percent of the U.S. DFS market—behind rival DraftKings—and claims 7 million registered customers—though only 1.3 million were listed as active customers—and across 40 states producing $124 million in revenue in 2017.
According to Paddy Power’s announcement, the agreement calls for its contribution of existing U.S. assets of about $612 million along with $158 million of cash, which will be used to pay down existing FanDuel debt—estimated at about $76 million—and fund working capital of the combined business.
Paddy Power’s U.S. assets include an online casino operation in New Jersey, a horse racing betting exchange platform, the third-place DFS site “Draft” and TVG, the horse-racing television network and major Advance Deposit Wagering platform.
When the deal is completed, Paddy Power will control 61 percent of the combined business, with existing FanDuel investors owning 39 percent, the announcement said. The deal allows FanDuel investors to roll their investment into the combined business with an agreed mechanism that could give Paddy Power ownership of 80 percent of the business within three years and 100 percent after five years.
Paddy Power 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 deal is expected to close by September.
In a related story, Jackson recently said the company is also “very keen” on making further acquisitions in Australia, where it already leads the online betting market through its Sportsbet subsidiary.
Speaking at the company’s annual general meeting and prior to the FanDuel announcement, Jackson said consolidation in Australia is likely as various Australian states are considering point of consumption taxes on online gambling.
The Australian state of Victoria recently adopted an 8 percent levy on online bets. Several other state are considering taxing online bets at about 15 percent. Those taxes could make it difficult for many smaller companies to compete, Jackson said.
“We’d be very keen to look at opportunities at sensible prices and without disrupting our existing business. We are interested in bolt-on acquisitions in the regulated markets in which we operate,” he said.
