US – Arbitrator rules in favour of Flutter and values FanDuel at $22bnBy Phil - 8 November 2022
Flutter is pleased to announce that the outcome of the arbitration confirms that FOX Corporation’s option to acquire 18.6 per cent of FanDuel Group is based on a FanDuel valuation of $22bn and a cost of $4.1bn for FOX to buy the stake.
Flutter said this is based on fair market value as of December 2020, the date on which Flutter acquired a 37.2 per cent stake from Fastball Holdings, for an implied FanDuel valuation of $11.2bn.
Peter Jackson, Flutter Chief Executive, commented: “Today’s ruling vindicates the confidence we had in our position on this matter and provides certainty on what it would cost FOX to buy into this business, should they wish to do so. FanDuel is winning in the US market and the clear #1 operator, a position driven by its exceptional market leading product and efficiency in acquiring customers at scale. The team remain focused on maintaining our leadership position and we look forward to updating the market on our progress at our US capital markets day on November 16.”
The market valuation contrasts with an implied $11.2bn valuation for FanDuel when Flutter acquired the stake from Fastball. The tribunal determined fair market value of $20bn based on the valuation submissions of both Flutter and FOX, where a full range of valuation methodologies were applied, including discounted cash flow.
FOX has a ten-year period from December 2020 within which to exercise the Option, should it wish to do so, subject to an annual compounding carrying value adjustment of five per cent. Cash payment is required at the time of exercise and the Option can only be exercised in full. Exercise of the Option requires FOX to be licensed and should FOX not exercise within this timeframe, the Option shall lapse.
After the commencement of the arbitration process in April 2021, FOX filed two supplementary items for consideration.
Firstly, FOX claimed that Flutter had failed to provide commercially reasonable resources to the operation of FOX Bet. The tribunal has denied FOX’s claim in its entirety and has ruled in favour of Flutter holding that commercially reasonable resources have been provided to FOX Bet.
This means FOX continues to retain the right to acquire up to 50% of TSG US1, which it can exercise only if licensed. In the event FOX does not get licensed and exercise its option in relation to TSG US, both parties have a right to terminate their agreement in relation to FOX Bet in August 2023. Should either party do so, this would result in a termination of the FOX Bet business. In this event Flutter would retain ownership of PokerStars US and Super6, while the use of the FOX Bet brand name would reside with FOX.
The remaining matter before the tribunal is whether and, if so, under what conditions FOX is entitled to participate in an IPO of a parent company of FanDuel, should one occur. Flutter has agreed that it will not proceed with any potential IPO, if at all, until the tribunal has resolved this remaining matter or both parties have reached an agreement on the matter. A binding decision from the arbitrator on this point is expected in early 2023.