Betfair US combines with FanDuel

Paddy Power Betfair plc (PPB) has confirmed it has entered into an agreement that will see its Betfair US business combine with daily fantasy sports firm FanDuel.

PPB will own 61 percent of the combined companies initially, with existing FanDuel investors owning 39 percent. All material FanDuel investors are rolling their investment into the combined business, PPB said.

In addition, a mechanism has been agreed to take PPB’s ownership of the business to 80 percent after three years and 100 percent after 5 years, consisting of call and put options at the prevailing market valuations.

PPB will contribute its existing US assets along with $158 million in cash. The cash portion will be used to pay down existing FanDuel debt (net debt of $76 million at 31 March 2018) and fund working capital of the combined business.

The deal strengthens PPB’s opportunity to target the prospective US sports betting market through the addition of a strong brand, large existing customer base of 7 million registered customers across forty States and a talented operational team. FanDuel has over 40 percent market share of the US daily fantasy sports market in the US and 1.3 million active customers.

The scale of the combined business also means it is well positioned in discussions with providers of market access for sports betting, a press statement detailed.

PPB 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.

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, added:

“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.”

The transaction is subject to customary regulatory and anti-trust reviews for transactions of this nature and is expected to complete in Q3 2018.