Flutter Entertainment/Stars Group deal: The US impact
Morgan Stanley estimates the group could have a 25% US market share considering FanDuel and Fox Bet’s positions
FanDuel owner Flutter Entertainment announced this morning it had agreed a deal to acquire The Stars Group (TSG) with the aim of forming the biggest online gambling group in the world.
The deal revealed some interesting implications for both company’s US operations, FanDuel and Fox Bet.
Firstly, TSG’s US media partner FOX Sports will be granted the right to acquire approximately 18.5% equity interest in FanDuel at its market value in 2021.
TSG’s initial deal with FOX saw the media giant acquire 14.3 million TSG shares at a price of $16.4 each share.
TSG planned to reinvest the $236m made from the shares to pay outstanding debt.
Source: Flutter’s analyst presentation on TSG acquisition
FanDuel’s Flutter co-shareholders Fastball and Boyd will be paid 12.5% of the increase in Fox Bet’s market value between the deal’s completion in July 2023.
Analyst firm Davy Research said the pay-outs would better align the two firms’ operating partners.
Both firms believe the deal puts the group in an enhanced position in the US, with a “strong product portfolio” this morning’s investor presentation said.
Will be interesting to see @FanDuel and @FOXBet leverage both brands for customer acquisition, combined market access through the multiple skin deals and streamlining backend technology and regulatory efficiencies…big day for US #sportsbetting https://t.co/C6NY1E6mJ6
— Sara Slane (@Sara_Slane) October 2, 2019
Morgan Stanley has estimated the group will have a 25% market share in the US, considering FanDuel’s leading position in New Jersey and Pennsylvania and Fox Bet’s potential reach.
Flutter reports 2018 combined revenues of $4.6bn, with US accounting for 5% of overall earnings.
Lachlan Murdoch, executive chairman and CEO of Fox Corporation, said the deal would build on the strength of its partnership with TSG.
“Teaming up with Flutter and FanDuel will allow us to build on that strength and jointly capture the significant market potential ahead of us,” Lachlan said.
“We’re excited to be able to expand our partnership into FanDuel, which together with FOX Bet, will be a leader in sports wagering in the US.”
UK-based analysts Regulus Partners said: “In terms of the emerging US opportunity, the combination of FanDuel and Fox is about the most compelling positioning possible.”
On tech integration, Davy said Flutter will employ an “API-based approach”, where all brands will remain responsible for the front-end technology and each will then be plugged into Flutter’s back-end tech stack.
This could suggest the end of the road for Stars’ Global Sports Trading platform that was under construction.