In light of U.S Supreme Court decision to lift the federal sports betting ban

Paddy Power Betfair is considering a merger with Fan Duel

New York-based Fan Duel allows sports fans to gamble on fantasy sports leagues and contests.
2018-05-16
Reading time 2:15 min
The gambling firm has announced that it is currently holding talks over a merger in the US with the fantasy sports site, which would create a business "to target the prospective US sports betting market".

“Discussions are ongoing and there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction,” Dublin-based Paddy Power Betfair said in a statement Wednesday. The deal would “create a combined business to target the prospective U.S. sports betting market.”

New York-based Fan Duel allows sports fans to gamble on fantasy sports leagues and contests. It offers fantasy sport gaming around NFL American Football, MLB baseball, NBA basketball and NHL ice hockey. There are estimated to be around 30 million adult fantasy sports players in North America.

Players choose which contest they want to enter, build fantasy sports teams that do not breach a fantasy salary cap, and engage in head-to-head or multi-player contests. They pay an entry fee for each contest and compete for cash prizes.

A proposal to merge with rivals Draft Kings was abandoned last year, after being blocked by the Federal Trade Commission on the grounds that the combined firm would control a 90% market share, the BBC reports.

Since the Supreme Court ruling on 14 May, Draft Kings has signaled its intention to enter the sports gambling market.

The talks may be the start of a wave of deals involving betting companies in the country, as shares of U.S. casino companies and bookmakers such as William Hill Plc rallied on the court decision, Bloomberg reports. Sports gambling could begin in a matter of weeks in casinos and racetracks in New Jersey, which instigated the legal fight by repealing its gambling ban.

Paddy Power Betfair entered the US fantasy sports market last year with the acquisition of Draft, a US fantasy sports site, for $48m (£35m). The Dublin-based gambling firm already has a US division, which includes the TVG Network, a horseracing TV channel and online betting network which is active in 35 states.

And in the state of New Jersey, the company has an online casino and a horse racing betting exchange. An acquisition of FanDuel “would improve the chances of Paddy Power Betfair establishing a foothold in the U.S. sports betting market,” Morgan Stanley analysts said in a note to clients.

Paddy Power Betfair issued its statement after the website Legal Sports Report published an article about the companies being in talks. Paddy Power Betfair is probably offering less than $1 billion, according to the site.

Axios reported in March that FanDuel was in talks to go public via a reverse merger with Platinum Eagle Acquisition Corp., a special-purpose acquisition company formed by media executive Jeff Sagansky. As part of a planned merger with DraftKings that was blocked by antitrust regulators, FanDuel in 2017 listed its equity valuation at $1.2 billion, Axios reported. Among the firms that have invested in FanDuel since its founding are KKR & Co., Alphabet Inc.’s Capital G fund, Time Warner Investments and NBC Sports Ventures.

Opportunities in a deregulated U.S. market will be more important for gambling companies if the U.K. clamps down, as expected, on the amounts customers can stake on highly profitable fixed-odds betting terminals, which have been linked to problem gambling and blamed for causing social harm. Analysts say William Hill would be worst hit by the change, and that the market has already started pricing in such an outcome.

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