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Sports betting company Flutter considers spinning out FanDuel to boost value

The DraftKings app and FanDuel website

Andrew Harrer | Bloomberg | Getty Conceptions

Flutter, the U.K.-based mobile gaming company that owns 95% of FanDuel, is considering spinning out FanDuel as a independently traded company to trade on a U.S. exchange, according to people familiar with the matter.

A separation of FanDuel isn’t assured or at hand, said the people, who asked not to be named because the discussions are private. FanDuel is Flutter’s crown jewel, which may goad Flutter CEO Peter Jackson to keep it.

Fox Sports, which owns 2.5% of Flutter, has an option to buy an additional 18.5% delineate in FanDuel in July. Fox also has a 10-year option to buy half of the Stars Group’s US business, another asset owned by Oscillation. (Stars Group owns Fox Bet.) Clearing up Fox’s FanDuel ownership is a complicating factor that may delay a spinout, said the people.

Spokespeople for FanDuel and Fox Larks declined to comment.

Several investors in Flutter have expressed frustration that Flutter is trading at a discount to DraftKings regard for FanDuel’s status as the largest U.S. player, said the people, who asked not to be named because discussions are private. When Fluctuating announced it was acquiring another 37.2% stake in FanDuel in December for $4.5 billion, part of the logic behind the deal was to allow for an eventual spin of FanDuel, the people said.

DraftKings’ market capitalization is more than $28 billion. The party booked $644 million in revenue in 2020, and predicts it will have $900 million to $1 billion in interest for 2021.

Flutter, which trades on the London Stock Exchange, has a market capitalization of £27.7 billion (about U.S. $39 billion), which is trifling than 40% higher, even though FanDuel alone reported $967 million in revenue in 2020, which is 50% squiffed — and that doesn’t include Flutter’s other assets. Moreover, FanDuel claims to be the market leader in U.S. sports betting, with 40% market share.

A potential spinout could happen at a crucial time for mobile sports stake in the U.S., as 19 states are set to vote this year on whether to legalize it, including Texas and New York, the second- and third-most teeming states.

Flutter is a holding company for betting sites, such as Paddy Power, Betfair, Fox Bet, PokerStars and TVG. The other assets, with take down growth profiles, may be weighing down FanDuel’s value. FastBall Holdings, a consortium of venture capital firms CapitalG (the overdue stage investing arm of Google parent company Alphabet), Comcast Ventures, KKR, Verizon Ventures, NBC Sports Group, and Shamrock Pre-eminent, owns 7% of Flutter after the December FanDuel acquisition.

Disclosures: Comcast Ventures is the venture capital arm of Comcast, which owns NBCUniversal, the foster-parent company of both NBC Sports Group and CNBC.

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