The aftermath of the US Supreme Court verdict on sports betting seems to have been already yielding positive results from gambling operators following Paddy Power Betfair’s merger with FanDuel.
Paddy Power Betfair and FanDuel issued a joint statement on Wednesday announcing a deal between the two companies. The release said the companies have reached “a definitive agreement under which the companies will merge their US businesses”, but they did not reveal the specific terms of the merger. The deal is expected to be finalised by the third quarter of 2018.
The deal is expected to cushion FanDual financially as it is yet to turn a profit in spite of holding a virtual DFS duopoly in the US with rival DraftKings.
The UK-listed Paddy Power Betfair will have a 61% stake in FanDuel, but the stake can be increased to 80% after three years and 100% after five years. The deal is said to involve only Paddy Power Betfair’s US-facing Betfair operations, including the Betfair-branded New Jersey online casino site and the TVG online horse racing business. Paddy Power Betfair will also have the power to appoint the CEO and majority of the directors of the merged U.S. Company.
FanDuel made $124 million in revenue in 2017 and the company is currently operating at “broadly EBITDA breakeven,” on a pro forma basis including expected collaborations, said PPB. However, this is not expected to have any substantial impact on PPB’s 2018 results.
The main reason behind the acquisition FanDuel is its database of 1.3 million active DFS players. These players are expected to be the primary candidate during a conversion to real-money sports betting as the US Supreme Court has recently struck down laws prohibiting federal betting.
As part of the deal, PPB will inject a cash amount of $158 million, which would be used to pay off the $76 million net debt of FanDuel and as a working capital of the merged business.
According to the CEO of PPB Peter Jackson, the merger has created “the industry’s largest online business in the US, with a large sports-focused customer base and an extensive nationwide footprint.” So for now, FanDuel is “incredibly well-positioned to capitalize” on the new US legal climate for sports betting.
On his part the CEO of FanDuel, Matt King said the companies “share an enthusiasm for innovation” which will allow them to be “the leading gaming destination for sports fans everywhere.”