Paddy Power Betfair enters DFS fray with $48m acquisition
London-listed firm announces all-cash deal for mobile-first US operator DRAFT
Paddy Power Betfair (PPB) has entered the DFS space for the first time with the acquisition of US operator DRAFT.
PPB will pay an initial cash sum of $19m, with up to an additional $29m due over the next four years, based on performance.
“This acquisition provides the group with exposure to a fast-growing market and complements our other businesses in the United States,” PPB said in a statement.
The DFS industry enjoyed a c.90% CAGR between 2014 and 2016 to over $300m in revenues, according to PPB.
DRAFT is a mobile-first version of DFS that looks more like season-long fantasy than the games offered by FanDuel and DraftKings, as users select their players for the night through a draft rather than a salary cap system.
“We are excited to be bringing DRAFT into the Group and to further increase our presence in the US,” PPB chief executive Breon Corcoran said.
“DRAFT has a differentiated product and we believe the business, with the support of our marketing and technology expertise, can take share in the fast‐growing daily fantasy sports market.”
The London-listed operator also pledged “substantial marketing investment in the business in the next few years,” warning investors it would result in an EBITDA loss of approximately $20m in 2017, but would “maximise the growth opportunity”.
DRAFT will also be given access to PPB’s marketing and technology capabilities.
The deal sees PPB become the latest gambling operator to stake a claim on the DFS sector, with Unibet, Paf and Amaya all having launched paid fantasy formats in recent months.
Jonathan Buxton, the head of consumer and retail at Cavendish Corporate Finance, said: “The firm is going ahead with the acquisition despite the fact that it may lead to a 3% drop in earnings in the immediate future, which reflects the group’s confidence in the potential of this market.
“The transaction is demonstrative of the increasing search for mobile-led, digital companies that are able to cater to the changing habits and needs of customers and could be the first step in the diversification of the group’s offerings.”