UK-listed gambling operator Paddy Power Betfair (PPB) has reached a deal to acquire US daily fantasy sports operator FanDuel.
On Wednesday, PPB and FanDuel issued a joint release announcing they’d reached “a definitive agreement under which the companies will merge their US businesses.” Specific terms weren’t disclosed, but the transaction is expected to be complete by Q3 2018. Rumors of the pending union first made waves last week.
The ‘merger’ involves only PPB’s US-facing Betfair US operations, which includes the TVG online horseracing business and a Betfair-branded New Jersey online casino site.
PPB will hold a 61% of the enlarged US company, with options to increase that stake to 80% after three years and 100% after five years. PPB will also appoint the US entity’s CEO and a majority of its directors.
PPB said that FanDuel generated revenue of $124m in 2017 and, on a pro forma basis and including expected synergies, the enlarged business is currently operating at “broadly EBITDA breakeven,” although it’s not tipped to have any material impact on PPB’s 2018 results.
The primary allure of acquiring FanDuel lies in the company’s database of 1.3m active DFS players, who (the theory goes) will be prime candidates for conversion to real-money sports betting now that the US Supreme Court has struck down the federal betting prohibition.
The deal is a financial lifeline for FanDuel, which has yet to turn a profit despite the site holding a virtual DFS duopoly in the US with rival DraftKings. PPB has agreed to contribute US$158m in cash to help pay off FanDuel’s net debt of $76m and fund working capital of the combined business.
PPB CEO Peter Jackson claimed the deal created “the industry’s largest online business in the US, with a large sports-focused customer base and an extensive nationwide footprint.” The companies claim the enlarged business is “incredibly well-positioned to capitalize” on the new US legal climate for sports betting.
FanDuel CEO Matt King said the two firms “share an enthusiasm for innovation” that would allow the business to create “the leading gaming destination for sports fans everywhere.”
