New York: Fox Corp. was told by an arbitrator that exercising its option to acquire an 18.6 per cent stake in sports-betting giant FanDuel would cost it at least $3.72 billion.
The deal for the FanDuel stake was structured as a 10-year option that expires in December 2030, Fox said in a statement. The terms include 5 per cent annual increases, which would make the ultimate cost higher, depending on when the option is exercised. FanDuel is majority owned by Irish bookmaker Flutter Entertainment Plc.
Fox said FanDuel can’t pursue an initial public offering without first gaining its approval or the arbitrator’s. Flutter disputed that interpretation in its own statement, saying it won’t pursue an IPO until the arbitrator rules on the conditions for Fox to participate in an offering. Flutter expects a decision on that matter in early 2023.
Fox could have been required to pay a much higher price. Valuations of sports betting companies have plummeted recently with shares of rival DraftKings Inc. suffering their worst single-day decline ever after the company reported weaker-than-expected results on Friday.
“Fox is pleased with the fair and favorable outcome of the Flutter arbitration,” the company said.
Fox, the TV company controlled by the Murdoch family, acquired the FanDuel option in 2019, when Flutter bought the Stars Group. Fox had an existing relationship with Stars. Flutter purchased a controlling stake in FanDuel in 2018, when the business was focused on fantasy sports contests. The site has since become the largest player in the US sports betting market.
The agreement between the two companies gave Fox the option to purchase the stake at the market value of FanDuel in July 2021. Fox argued, however, that its cost should be what Flutter paid to buy out other FanDuel investors in December 2020, a deal that valued FanDuel at $11.2 billion.
Flutter also operates FoxBet, an online betting site that uses the media company’s brand. Fox CEO Lachlan Murdoch has said Flutter isn’t doing enough to expand that business.
Flutter said the arbitrator denied that claim and that both parties have the option of terminating the FoxBet business in August 2023.
Sports betting has exploded in the US since the Supreme Court ruled in 2018 that it could expand outside of Nevada. More than 30 states now allow it.
