A New York arbitrator has settled a lengthy legal dispute between fantasy sports and betting company FanDuel’s parent Flutter and the Murdoch-owned media corporation Fox, with both sides claiming victory.
Fox must pay at least $3.7 billion (€3.7 billion) if it decides to exercise its option to take an 18.6 per cent stake in FanDuel, the ruling said.
Fox filed an arbitration claim against Paddy Power owner Flutter in April last year, arguing that it should be allowed to pay a lower price for the minority stake in FanDuel, based on an $11.2 billion valuation from when Flutter last upped its stake in the business in December 2020.
But New York’s Judicial Arbitration and Mediation Services ruled on Friday that Fox’s option should be based on a $20 billion valuation with a 5 per cent annual ratchet, meaning Fox would currently have to pay more than $4 billion for the equity. Fox has until 2030 to exercise its option.
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The ruling represents a victory for Flutter, which could have been forced to sell the minority stake at a heavily discounted rate had it lost.
“[The] 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,” said Peter Jackson, Flutter’s chief executive.
The valuations of sports betting companies have soared in recent years as a wave of states have legalised the activity and more consumers have come onboard. Sports betting revenues totalled $4.3 billion last year and are set to nearly triple by 2025, according to Morgan Stanley.
Media companies are scrambling for a slice of the booming market. ESPN is considering a possible licensing deal with rival betting company DraftKings. In August, Lachlan Murdoch, Fox CEO, told investors that sports betting was “a huge opportunity” for Fox Sports.
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Fox also claimed victory from the ruling, saying its 10-year option for a stake in the “market-leading US online sports betting operation” confirmed the “tremendous value” it had created for shareholders by being a “first mover media partner” in the sports betting industry.
Fox added that Flutter cannot pursue a long-mooted public listing of FanDuel without “Fox’s consent or approval from the arbitrator”. But Flutter denied that Fox could block an IPO, stressing that a separate ruling would determine Fox’s role in a potential listing, with a decision due during the first half of next year.
The Murdoch-owned media conglomerate obtained its option to buy an 18.5 per cent stake in FanDuel at fair market value as part of Flutter’s £10 billion merger with The Stars Group, which operated a sports betting platform with Fox.
The arbitrator dismissed Fox’s claim that Flutter had mismanaged the FoxBet brand, which is currently available in just four US states. – Copyright The Financial Times Limited 2022
