FanDuel founders launch civil action against Paddy Power Betfair
News on 16 Aug 2018
News on 16 Aug 2018
Civil litigation filed in a Scottish court this week reveals that former FanDuel CEO Nigel Eccles, along with three other founders of the company – Lesley Eccles, Tom Griffiths and Rob Jones – are unhappy with the manner in which they claim Paddy Power Betfair directors “purposely undervalued” FanDuel in the recent $465 million acquisition of the company.
The plaintiffs claim that Paddy Power Betfair stock rose 28 percent in the two weeks following the liberalisation of US sports betting by the Supreme Court in May this year, and that FanDuel’s stock valuation was not recalculated until the deal was closed.
Under the terms of the deal some of the early investors in FanDuel were guaranteed windfalls, while those who held non-preferred shares – including the plaintiffs – were not. The plaintiffs are seeking around $120 million as compensation from PPB.
The plaintiffs, as founders of the company, had already departed FanDuel when the acquisition took place, but had maintained a substantial ‘non-preferred’ share arrangement, attached to FanDuel’s future outcome.
“The decision of the board not to seek and act upon a new market valuation in the face of a material event, which is likely to have significantly increased the market valuation of FanDuel, is a breach of its fiduciary duties,” the plaintiffs claim in their filing.
Following the acquisition, Paddy Power Betfair used the formerly DFS enterprise to create the sports betting focused FanDuel Group, merging FanDuel DFS and nascent sportsbook with other PPB assets in a US subsidiary designed to prosper from the newly liberalised US sports betting landscape.
PPB holds a 61 percent controlling share of the US business, an arrangement supported by powerful investors.
Paddy Power Betfair has responded to news of the litigation by commenting that the Eccles et al allegations are “not rooted in facts or reality”.
A spokesman said Wednesday: “In preparation for this deal, an exhaustive process was undertaken with the anticipation of PASPA’s likely repeal. The deal was consummated consistent with the corporate governance rules and cap table established under the former founders’ leadership.
“The facts are that this was a sound business transaction that achieved the highest valuation possible for shareholders and was the right strategic move for the company’s future.”
