Following rumors and non-denials, Paddy Power Betfair (PPB) now has officially announced it has reached a definitive agreement to combine its Betfair U.S. operations with FanDuel, the number two U.S. daily fantasy sports operator. The news was first reported by Legal Sports Report.
The move is expected to fortify PPB’s U.S. footprint in the emerging U.S. sports wagering marketplace by aligning itself with “a strong brand, large existing customer base and talented team,” the PPB announcement said.
The aligning of the two companies in the U.S. will position them as major players in the emerging US sports betting market, now unfettered by federal regulations that had effectively prohibited nearly all kinds of sports betting outside of Nevada. The U.S. Supreme Court struck down the law banning single-game sports wagering outside of Nevada last Monday.
Paddy Power Betfair Announces Acquisition of FanDuel, Expanding US Footprint in a Rapidly Moving U.S. Sports Betting Marketplace in Wake of Supreme Court Striking of PASPA
Today we’ve teamed up with @FanDuel for an exciting US sports betting partnership: creates the #1 US online operator with 8m registered customers across 45 states. Full announcement here: https://t.co/uEepsAQexG pic.twitter.com/mmSveMl4mB
— Paddy Power Betfair (@PPBetfair) May 23, 2018
PPB says, “The scale of the combined business also means it is well positioned in discussions with providers of market access for sports betting.”
FanDuel claims over 40 percent of Daily Fantasy Sports (DFS) market with what is says are 7 million registered customers across 40 states producing $124 million in revenue in 2017.
PPB says the agreement calls for its contribution of existing U.S. assets along with $158 million of cash. This cash contribution will be used to pay down existing FanDuel debt (net debt of $76 million on March 31, 2018) and fund working capital of the combined business. PPB’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, most significantly TVG, the horse-racing television network and major Advance Deposit Wagering (ADW) platform.
Some additional words from PPB and CEOs Kip Levin and Peter Jackson:
Delighted to announce our transaction with @FanDuel – hugely excited about the deal and the opportunity it gives us to tackle the US sports betting market
— Peter Jackson (@jpeterjackson) May 23, 2018
Incredibly excited and proud to welcome the #FanDuel team to our US business and @TVG as we prepare for the pending legalization of #SportsBetting across the US!
— Kip Levin (@kip) May 23, 2018
.@FanDuel is an iconic brand for US sports fans and today’s transaction strengthens the Group’s opportunities within the prospective US sports betting market: pic.twitter.com/RLPGpmgIbW
— Paddy Power Betfair (@PPBetfair) May 23, 2018
When the deal is completed, PPB says it will own 61 percent of the combined business, with existing FanDuel investors owning 39 percent.
All material FanDuel investors are rolling their investment into the combined business with an agreed mechanism that could take PPB’s ownership of the business to 80 percent after three years and 100 percent after five years. That mechanism consists of call and put options at the prevailing market valuations, according to PPB.
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.
Pending various regulatory approvals, the deal is expected to close by September.
Elsewhere, DFS competitor and at one time potential merger partner (until the Federal Trade Commission rejected it), DraftKings, is moving aggressively to enter the sportsbook/operator arena, announcing its new sportsbook vertical on Monday. Advertising in New Jersey has already begun, as well.
first look: DraftKings wasted no time after SCOTUS ruling in getting billboards up in New Jersey advertising forthcoming sportsbook.
billboards on highway and at train stations say: “WHY SHOULD VEGAS HAVE ALL THE FUN?” and “LEGAL SPORTS BETTING IN JERSEY? YOU BET” pic.twitter.com/vHmxdwWgPJ
— Daniel Roberts (@readDanwrite) May 22, 2018
One hurdle in the U.S. market for PPB/FanDuel, as indicated above, will be finding partners for which to handle wagers, or obtaining sportsbook licenses itself in the quickly expanding but still uncertain US market. Regulations in states may differ widely. For example, Mississippi will probably allow on-premises wagering only, and New Jersey is looking to allow online wagering off the bat.
[Also See: In A Regulated U.S. Sports Betting Market, Which Operator Will Be King?]