Irish bookmaker Paddy Power Betfair is set to test the U.S. daily fantasy sports market – dominated by fantasy sports giants DraftKings and FanDuel – with the acquisition of a mobile-led product.
Paddy Power announced in a regulatory filing on Wednesday that it had acquired early-stage daily fantasy sports operator DRAFT for an initial cash consideration of $19 million.
The fantasy league game, which targets casual players, boasts a mobile-first approach and emphasizes modest stakes. It has raised $4.5 million in venture backing since its founding in 2015, and has 10 employees.
PPB said the business would continue to be run by co-CEOs Jeremy Levine and Jordan Fliegel and would now have access to the group’s marketing and technology capabilities.
PPB chief executive Breon Corcoran pointed out that the acquisition provides the bookmaker with exposure to a fast-growing market and complements our other businesses in the United States.
“We are excited to be bringing DRAFT into the Group and to further increase our presence in the United States. 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,” Corcoran said in a statement posted on the company’s website.
Meanwhile, DRAFT co-CEO Levine told Crain’s New York Business that the merger would be good for the company business, because competition on marketing and advertising will cease to exist between the two operators.
Depending on the business’ performance, PPB said that the deal could involve further cash consideration of up to $29 million, which will become payable over the next four years.
PPB alerted investors that the company might see a three percent drop in its earnings due to DRAFT’s acquisition. To maximize the growth opportunity, substantial marketing investment in the business is envisaged in the next few years, with an EBITDA loss of approximately $20m forecast in 2017.
“However, the market opportunity is such that this dilution could represent a small price to pay for longer-term returns,” PPB said.
