Newly Crowned Online-Gambling King Takes On U.S. With Two Brands

(Bloomberg) -- The world’s biggest online-gambling company will approach the rapidly growing U.S. sports-betting market with two major brands: FanDuel and Fox Bet.

Both are coming under the umbrella of Flutter Entertainment Plc, which announced on Tuesday morning that it is buying Stars Group Inc. in a $6 billion deal. The tie-up creates one megacompany that will lead the industry. Flutter’s brands include Paddy Power, Betfair and FanDuel; Stars Group’s include PokerStars, BetStars, SkyBet and Fox Bet.

The combined company will set its sights on the U.S. sports-betting marketplace, which is quickly expanding as more states choose to legalize wagering on professional contests like NFL games and golf tournaments. To do that, Flutter will promote both FanDuel, the early leader in sports betting in New Jersey and Pennsylvania, and Fox Bet, a collaboration between Fox Sports and Stars Group that launched last month.

“We’re going to run a dual-brand strategy,” said Matt King, chief executive officer of FanDuel. “It’s a proven model in the betting space. If you look at Paddy Power and Betfair in the U.K. and Ireland, both of those brands compete against each other but they also attack different parts of the marketplace. We think there is a complementary nature between FanDuel and Fox Bet.”

Brand Positions

The FanDuel brand leans more toward daily-fantasy users and the more engaged and avid bettor. Fox Bet, which also has a popular free-to-play game, is going after more casual, entertainment-seeking gamblers. The two groups both likely will use content from Fox Sports’s media enterprise.

“We literally just got into this business because we thought there was tremendous upside,” Fox Sports CEO Eric Shanks said. “Having this opportunity now to double down with FanDuel provides even more upside, we think.”

For Fox Corp., the tie-up presents an immediate opportunity to grow Fox Bet as well as an option for more investment, should the company choose to deepen its involvement in gambling. Fox in May bought a 4.99% stake in Stars for $236 million, and as part of that deal, Fox Sports holds an option to buy as much as 50% of Stars’ U.S. business within the next 10 years.

Under Wednesday’s Flutter acquisition, Fox has also received the right to buy 18.5% of the new Flutter’s U.S. business at its 2021 market value.

Shanks said it was too early to think about those options. “We’re much more in operating and executing mode at this point,” he said.

World’s Biggest

Flutter and Stars had a combined $4.6 billion in revenue last year, which makes the new company, which will be based in Dublin, the biggest online gaming and betting operator in the world. Shareholders in Stars, which has a market capitalization of $4.4 billion, will receive 0.2253 new Flutter shares in exchange for each of their company’s shares, the companies said in a statement.

Since the Supreme Court ruled last year that U.S. states could legalize sports gambling within their own borders, a dozen have joined Nevada in taking bets. Another handful of states have passed laws and are awaiting launch. Shanks said last spring that sports betting, online casinos and poker could become a $9 billion revenue market by 2025 when wagers, sponsorship and advertising are all tallied up.

“We’ve been surprised by how quickly states have turned on, and how quickly they’ve gotten to scale,” King said, before using a gambling metaphor to describe Flutter’s opportunity: “I would take the over on the analyst expectations at this point.”

To contact the reporter on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, John J. Edwards III, Rob Golum

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