Paddy Power Betfair confirms potential bid for FanDuel
London-listed firm in talks to acquire a majority stake in the DFS operator to help target the US sports betting market
Paddy Power Betfair (PPB) this morning confirmed it is in discussions to buy a majority stake in US DFS operator FanDuel.
Rumours of a potential acquisition first surfaced last night from US news outlets Legal Sports Report, before the London-listed firm issued an RNS announcement this morning.
“PPB notes the media speculation, and confirms it is in discussions, regarding a potential combination of the Group’s US business and FanDuel to create a combined business to target the prospective US sports betting market,” the statement read.
“Discussions are ongoing and there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction.
“A further announcement will be made as appropriate.”
FanDuel declined to comment.
Crucially, the deal would be structured as a combination of PPB’s existing US business and FanDuel, with PPB taking a majority stake, and then providing investment and sports betting technology to the firm as the US regulates the activity.
The structure of the deal also allows FanDuel and existing investors – which include NBC, Comcast and private equity house KKR, a chance to participate in the US sports betting market.
PPB believes FanDuel’s brand and customer database will help it to scale sports betting quickly, EGR understands.
FanDuel has around 6 million customers in its database and around 1 million paid active users.
EGR understands the price is likely to be a long way below the $1bn valuation that FanDuel once enjoyed, in part because of the structure of the deal.
A DFS industry source speaking off the record said PPB needed FanDuel to help attract younger bettors “rather than the octogenarians that use [horseracing network] TVG”.
The source also suggested PPB could face a bidding war for FanDuel with the Supreme Court decision in favour of sports betting confirmed on Monday.
The deal would mark PPB’s second foray into the DFS industry after it acquired start-up operator Draft almost exactly a year ago for up to $50m.
PPB’s US revenues climbed 23% to $38m in Q1.
Barclays said in a note this morning: “PPB has no doubt learnt a great deal about the DFS industry over the last year having acquired Draft and we believe the potential deal is a good strategic fit for PPB and a clear signal that diversification in the US is a key part to the investment thesis from here.”
Irish broker Davy added: “From PPB’s perspective, a deal would bring three key things: an extremely well recognised US brand, an award-winning technology platform that can now be converted to offer real money sports betting and, perhaps most importantly of all, a database of over 6m sports-loving US customers.
“In our view, these customers would be very likely to sports bet once individual state markets open up.
“From FanDuel’s perspective, it would gain access to all that PPB can bring to the table — its pricing models, its risk and trading expertise, its potential distribution via TVG and its expertise with respect to cross selling. Therefore, for both sides, a deal would make a huge amount of sense strategically.”