US News and sports broadcasting powerhouse Fox News could yet become sports betting stakeholder soon as it sets to acquire some interest in Flutter Entertainment-owned sports betting giant, FanDuel. An initial stake in the sportsbook brand, distinguished as a frontrunner in the US sports betting market for a while now, was purchased by Flutter in 2018, with the company to own 95% of the bookie as of last December.
Existing Fox and Flutter Relationship
Fox Sports Media Group, Fox Corporation’s primary subsidiary, owns the Fox Sports 1 & 2 and Fox Sports Radio channels, as well as FOX Bet. The latter was created in partnership with Canadian gaming company The Stars Group as a sports betting platform in which Fox holds a 5% share. The joint venture between both companies also gave Fox the right to purchase 50% of the Canadian online gambling company’s US business over the next ten years.
In 2020, Flutter Entertainment merged with TSG in a $6 billion deal that added FOX Bet to the former’s portfolio, which already included Betfair, PokerStars, Paddy Power, and FanDuel. Quite notably, the merger also granted Fox a 2.6% stake in Flutter, as well as an option to purchase an 18% share in FanDuel (The Motley Fool, 2021).
As of December last year, things seemed very rosy between both companies as Fox backed Flutter’s move to acquire a majority stake in FanDuel. Speaking on Flutter’s FanDuel move, CEO of Fox Corporation Lachlan Murdoch said: “Fox’s investment in Flutter underscores our confidence in Flutter’s business and its management’s ability to continue to drive leadership in the US market” (The Irish Times, 2021).
Differing Valuations
Flutter’s acquisition of TSG presented Fox with an option to acquire an 18.5% stake in FanDuel after its equity stake was transferred to Flutter. That option was set to be activated this month, but both companies have run into a valuation argument that has seen Fox’s owners launch legal action against Flutter. Fox argues that its option to acquire stakes in FanDuel this month should be valid along the valuation lines Flutter exercised in December of last year; Flutter disagrees. Flutter CEO Peter Jackson stated that Fox must pay a fair market rate in July 2021 by two investment banks. (Nasdaq, 2021)
Jackson, speaking during Flutter’s first-quarter earnings conference call where the company broke down the contribution made by each asset in its portfolio, explained that FanDuel accounts for 91.6% of the company’s revenue, with FOX Bet and PokerStars amounting to just 8.4%.
There is a feeling that both companies could yet settle the dispute amicably, with the potential for both sides to make major upsides from expanded cooperation serving as a motivator if Flutter Entertainment goes ahead with its IPO consideration for FanDuel.
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Sources
- The Irish Times, 2021 – https://www.irishtimes.com/business/retail-and-services/can-flutter-find-friends-again-in-fox-to-deliver-on-us-online-gambling-promise-1.4610065
- The Motley Fool, 2021 – https://www.fool.com/investing/2021/06/09/fanduel-sports-betting-partnership-gives-fox-34-up/
- Nasdaq, 2021 – https://www.nasdaq.com/articles/will-a-fanduel-and-fox-partnership-be-a-sports-betting-powerhouse-2021-06-18
