FanDuel co-founders sue Paddy Power Betfair for $120m
Four petitioners including former FanDuel CEO Nigel Eccles claim the takeover deliberately undervalued the company
The founders of FanDuel are suing the company and by extension Paddy Power Betfair for $120m, according to court documents filed in Scotland.
The suit has four petitioners, led by former FanDuel CEO Nigel Eccles, along with his wife Lesley Eccles and Tom Griffiths and Rob Jones.
The petitioners received no money from the PPB takeover of FanDuel – a deal which valued the firm at $465m – despite owning around 7% of the ordinary shares of the company.
However, thanks to a so-called “waterfall” financial arrangement, some of the company’s early investors – the likes of KKR – were paid out first.
The petitioners argued the $465m valuation was deliberately low, while a more reasonable valuation that considered the prospects of US sports betting would have seen the co-founders receive up to $120m.
The petitioners noted PPB’s valuation increased by over 28% following the repeal of PASPA (adding $2bn) despite only 6% of its revenues coming from the United States.
The document adds: “The decision of the FanDuel board (whose interests are aligned with preference shareholders), not to seek and act upon a new market valuation … is a breach of its fiduciary duties.
“The petitioners reasonably estimate they are being denuded of value for their ordinary shares amounting to $120m.”
The petition asks for Scottish courts to force FanDuel’s preferred shareholders “purchase the petitioners’ ordinary shares at market value”.
However, FanDuel has dismissed the allegations, telling Recode the petition was “simply not rooted in facts or reality”.
The spokesperson said: “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.”
Paddy Power Betfair had not yet responded to an EGR request for comment at the time of publication.