Paddy Power Buys FanDuel in Bid to Dominate Sports Betting
(Bloomberg) -- Paddy Power Betfair Plc agreed to take control of the closely held website FanDuel, as the Irish bookmaker seeks to gain from an expected rise in sports betting following a U.S. Supreme Court ruling this month.
Paddy Power will own 61 percent of the combined business after contributing its U.S. assets and $158 million of cash, the Dublin-based company said Wednesday in a statement. It has options to increase its ownership to 80 percent after three years and 100 percent after five.
The deal values the combined operation at more than $1 billion, according to three people familiar with the matter who asked not be identified because the terms are private. It’s the first of a wave of possible U.S. deals involving betting companies after the Supreme Court struck down the federal law that barred sports betting in most of the country.
“We are excited to add FanDuel to the group’s portfolio of leading sports brands,” Peter Jackson, chief executive officer of Paddy Power, said in the statement. “This combination creates the industry’s largest online business in the U.S., with a large sports-focused customer base and an extensive nationwide footprint.”
Shares of U.S. casino companies and bookmakers rallied after the high court’s decision, anticipating that wagering could begin in a matter of weeks at casinos and racetracks in New Jersey, the state that brought the legal fight.
New York-based FanDuel has 7 million registered users and more than a 40 percent share of the U.S. daily fantasy sports market, according to Paddy Power.
Paddy Power, founded in 1988 through a combination of Irish betting parlors, has been on expansion course in the U.S. Three years ago it merged with Betfair, an online betting business in Europe that owned TVG, a U.S.-based horse racing TV network and online betting business. Last year it acquired Draft, a fantasy sports app.
FanDuel lost $37 million before interest, taxes, depreciation and amortization on revenue of $124 million last year, Paddy Power said in a presentation. The combined Paddy Power and FanDuel businesses will have online revenue in the U.S. of $265 million, making it larger than rivals such as DraftKings, at approximately $155 million, and Churchill Downs Inc.’s TwinSpires business, with $132 million, the company said.
States outside of Nevada must still pass legislation and regulations laying out the framework for legal sports betting. Land-based casinos and horse tracks have historically been given preferential treatment when new betting businesses are introduced. Sports leagues too have been asking for a cut of the action.
On a call with investors, Jackson said his company’s position in horse racing, where it takes online bets for dozens of tracks, will give it a leg up. Jackson said he didn’t expect to change Paddy Power’s profit forecast as result of the FanDuel deal.
“The purpose of this transaction is not to try to save costs,” he said. “If you look at the nascent sports betting business it is going to require additional investment.”
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