Closeup of a craps table with dice and fiches (3d rendering)
On March 15, 2021, Flutter Entertainment PLC (OTC US: PDYPY, US $ 117.75, market cap: US $ 41.24 billion) announced that it was considering strategic options for its US FanDuel business, including a partial listing in the the USA The company’s clarification is in response to recent press speculation about FanDuel’s possible IPO. The company has stated that no decision has been made and has indicated that a further formal announcement will be made once a decision has been made to proceed with a listing in due course. Flutter Entertainment would hold the remaining stake in FanDuel and continue to grow as a global sports betting and gaming company. Flutter’s share price rose nearly 6% on the day of the announcement.
Flutter Entertainment PLC and price history
FanDuel was founded as a fantasy sports company in 2009 and has grown to become America’s largest online sports betting business with a market share of around 40%. Flutter completed the merger with The Stars Group in May 2020 and bought another 37% stake in FanDuel from its early private equity investors in December 2020. The company had already bought a 58% stake in FanDuel in 2018% acquisition, the company increased its stake to 95%. Flutter noted that the FanDuel deal raked in an enterprise value of $ 11.2 billion, a discount of over 40% on the enterprise value of DraftKings, a distant second player in the U.S. market.
Breaking up with Fanduel is not easy, however. Fox
The company, the media giant chaired by Rupert Murdoch, is one of the 10 largest shareholders in Flutter and holds a 2.6% stake. While Flutter owns 95% of FanDuel, it has an agreement with Fox that gives Fox the right to acquire an 18.6% stake in the business with an option of 10 years from June 2021. The deal dates back to Flutter’s merger in May 2020, valued at $ 12.3 billion, with Canadian gaming company Stars Group, which had a 25-year license with Fox to use the Fox Bet brand. Flutter needs to resolve these ownership issues ahead of Fanduel’s potential IPO.
Carve-out details and top 5 shareholders
Flutter’s spin-off from FanDuel aims to address Flutter’s undervaluation from its peers as the stock market has clearly not adequately valued Flutter’s strong market position. The company noted that its U.S. revenue in 2020 was $ 896 million, higher than that of DraftKings ($ 644 million) and higher than the combined revenue of its two closest counterparts, DraftKings and PennNational (a casino and racetrack operator). Additionally, Flutter shareholders are frustrated that the stock market has not adequately valued this strong market position. FanDuel’s closest rival, DraftKings, has a stock market value of $ 28.6 billion.
Before the price rise on the day of the announcement, Flutter was valued at £ 27.7 billion ($ 38.5 billion). This isn’t much of a difference given that Flutter also owns a host of other well-known and profitable betting brands. Accordingly, some investors have pushed Flutter to outsource FanDuel, finding that the latter could achieve a stock market valuation of up to $ 37 billion, well above the current market cap of its closest colleague DraftKings ($ 28.6 billion). DraftKings celebrated one of the most successful stock market debuts in the US last year. It hit the market at $ 10 per share in April 2020 through a merger with a Special Purpose Acquisition Company (SPAC) or a blank check firm called Diamond Eagle Acquisition Corp, which was listed in 2019. The stock closed on Friday at an all-time high of $ 71.98.
A separate listing from FanDuel will help unlock the value and offer investors the opportunity to join a pure and market leading US sports betting and i-gaming provider (as well as FanDuel’s daily FantasyD sports store and the provider of Horse races with the same Mutuel), TVG) without having to own the current disadvantageous regulatory risk of Flutter shares. The proceeds from the IPO will expedite Flutter’s deleveraging process as a partial sale of its stake in FanDuel would erase most of FLTR’s debt. In addition, the IPO could provide a pricing mechanism and maximize FOX’s option to acquire an 18.5% stake in FanDuel which is valued at market price.
The global betting and gaming market achieved gross gaming sales of £ 345 billion (“GGR”) in 2019 with an online share of just 13%. The online sector has had a long period of growth. Average annual growth of 10% is expected through 2024. While there are many exciting market opportunities, the rapidly regulating US market is arguably the most attractive to the company and Flutter has already established a leadership position in that market. Recently, Flutter increased its TAM for its US market to over £ 14 billion ($ 20 billion) in 2025 as the number of US states braces to legalize sports betting. The increase in spending patterns in states where the company went live, such as New Jersey, Pennsylvania, and Michigan, is also a good sign for the company. The company now expects 65% of the US adult population to have online sports betting by 2025, compared to 50% earlier, and iGaming is expected to be accessible 16%, compared to 11% earlier. As of the fourth quarter, the company had a 40% market share in online sports betting and 20% in iGaming in the US. FanDuel Sportsbooks are online in 10 states after their launch in Michigan and Virginia. It has now reached nearly a quarter of the US population.
Flutter Entertainment PLC (parents)
Flutter Entertainment plc (OTC US: PDYPY) is a global sports betting and gaming company and part of the FTSE 100 and Euro Stoxx 50. Flutter Entertainment plc reports on four divisions: Flutter UK & I, Flutter International, FanDuel Group and Sportsbet. The UK & I division, consisting of Paddy Power, Betfair and Sky Betting & Gaming, forms the combined business in Great Britain and Ireland. The brands operate primarily online and also include more than 620 Paddy Power betting shops in the UK and Ireland. The international division operates in a number of areas around the world and is probably best known for its flagship brand, PokerStars, the world’s largest online poker site. Other notable brands include Betfair International, PokerStars Casino, PokerStars Sports, Junglee Games, and Adjarabet. The FanDuel Group, the company’s US division, consists of the brands FanDuel, FOX Bet, TVG, PokerStars and Betfair. The Sportsbet brand is the leader in online sports betting across Australia. For FY20, the company had sales of £ 4.4 billion.
FanDuel Group (spin-off)
The company’s US division consists of the brands FanDuel, FOX Bet, TVG, PokerStars and Betfair. The division has a diverse range of online and retail sports betting, online gaming, poker, advanced deposit betting on horse racing and television broadcasts. It is the market leading online sports betting and casino operator in the fast growing US market and the group is well positioned to continue to seize this opportunity. FanDuel now offers online sports betting in 10 US states, most recently in Virginia and Michigan. Voting to legalize the practice in other major states, including New York, Texas, North Carolina and Montana, is slated for later this year.