Fox wins the appropriate to purchase an curiosity in FanDuel, however not on the desired worth

The FanDuel Inc. app.

Andreas Harrer | Bloomberg | Getty Images

Fox the right to acquire an 18.6% stake in sports betting company FanDuel Group from its parent company flutterbut not in judging, according to a ruling by a New York judge on Friday.

Should Fox exercise its option to acquire the stake, it would go for at least $3.72 billion.

The decision ends the more than year-long legal battle between the two companies over the valuation of FanDuel, which has developed into one of the leading US sports betting platforms alongside services DraftKings, Caesars and MGM.

The price Fox would have to pay is based on a $20 billion FanDuel valuation, according to the verdict. Flutter, which owns nearly 95% of FanDuel, acquired a 37.2% stake in the company in December 2021 at an implied valuation of $11.2 billion. Fox had argued that the price should be based on that threshold.

Still, Fox could have paid a lot more. A March 2021 estimate by Jeffries analysts said FanDuel could be worth as much as $35 billion, which would translate to a value of almost a fifth to nearly $6 billion.

“Fox is pleased with the fair and favorable outcome of the Flutter arbitration,” the company said in a statement following the ruling. “Fox has no obligation to provide capital for this opportunity unless it exercises the option. This opportunity for a significant equity investment in the market-leading US online sportsbook confirms the tremendous value that Fox as a first media partner has brought to the US sportsbook landscape.”

Fox has a 10-year option to acquire the interest, which expires in December 2030. The arbitrator ruled that there would be a 5% annual escalation on the purchase price, meaning the current price of a deal would be $4.1 billion.

“Today’s ruling confirms the confidence we had in our position on this matter and provides certainty as to what it would cost Fox to buy into this business should they choose to do so,” said Peter Jackson, Flutter’s CEO, in an explanation.

Fox said as part of the arbitration award, Flutter could not pursue an IPO for FanDuel without Fox’s approval or the arbitrator’s approval. However, Flutter denied that claim and later told CNBC in a statement that Fox is not blocking a possible FanDuel IPO, should one take place.

Flutter had previously considered listing FanDuel to capitalize on the booming sports betting market.

Sports betting has continued to grow in the US as more states bring legal sports betting online – as of November 1, 33 states allow some form of sports betting, with California having two measures on its ballot to legalize it.

That also boosted revenue. Commercial sports betting revenue nationwide through August was $3.97 billion, up nearly 70% year over year, according to data from the American Gaming Association.

But this continued growth has not benefited all public sportsbooks. DraftKings stock posted its worst-ever drop on Friday after the company reported monthly customer growth that fell short of estimates, even as it revised upwards its revenue forecast. DraftKings, which is down more than 59% year-to-date, is now valued at just over $5 billion.

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