Fox challenges Flutter on FanDuel’s ‘fair market pricing’

Fox Corporation has launched legal proceedings against Flutter Entertainment in relation to the former exercising its option to acquire an 18.6% stake in the FanDuel sportsbook.

Flutter has argued that Fox must conduct the transaction at a ‘fair market price’, whilst the American multimedia corporation maintains that it should pay the same amount Flutter paid in December 2020.

Through its Fox Sports subsidiary, Fox has served as the strategic broadcast partner of Flutter for the US wagering market, a deal brokered in 2019 following the FTSE100 firm’s $11 billion merger with The Stars Group Inc – in which Fox held a minority investment.

A Fox statement released yesterday read: “Fox Corporation has filed suit against Flutter to enforce its rights to acquire an 18.6% ownership interest in FanDuel Group — an American sports betting brand — for the same price that Flutter paid for that interest in December 2020. The suit was filed as an arbitration before JAMS in New York, NY by consent of the parties.”

Flutter initially obtained a 37.2% stake in FanDuel, setting Fox’s 18.6% desired share at $11.2 billion, but the UK-based betting entertainment group believes that the company is now worth much more.

Fox holds a 10-year option to purchase half of the Stars Group’s US operations as a result of this merger, further maintaining that this option exists in parallel with the 18.6% stake in FanDuel, according to CNBC.

Accelerating its US options, last December Flutter reached a $4 billion settlement to acquire all existing FanDuel shares held by venture capital investors under the consortium of FastBall Inc.

Speaking during an earnings conference call in March, as reported by CNBC, Flutter Chief Executive Peter Jackson said: “We will honor our commitment to give Fox an option to acquire 18.6% of FanDuel at fair market value in July 2021.

“To be clear on the valuation, Fox will have to pay the fair market value, which is different from the negotiated price agreed between Flutter and Fastball, which reflected the specific circumstances that Fastball found itself in. The valuation will be carried out in the same manner that would have occurred had Fastball still owned the stake.”

Flutter is also currently considering an Initial Public Offering (IPO) of FanDuel, which could further affect the company’s market value.

FanDuel’s market position in the US has significantly expanded since Flutter’s share acquisition, offering sports betting products in 10 states, horse racing wagering in 30 and fantasy sports in 40, whilst a further 19 states are set to vote on legalisation of mobile gambling later this year.

In response to Fox’s legal challenge, Flutter issued its own statement this morning, saying that it ‘notes the statement,’ adding that an the American firm had initiated an arbitration mechanism put in place at the time of the Stars Group merger announcement specifically relating to a potential disagreement regarding that option.

The firm continued: “Fox’s position that it has a right to acquire an 18.6% interest in FanDuel based on an $11.2 billion valuation is incorrect. It would represent a windfall to Fox compared to the fair market valuation as of July 2021, to which the parties had previously agreed. 

“Flutter will not allow Fox’s filing, which is without merit, to distract from its business and will vigorously defend its position in the arbitration.”

Fox legal challenge compounds further US headaches for Flutter, who in March were denied an appeal by the Supreme Court of Kentucky to rehear the litigation case of PokerStars owing the State of Kentucky $870 million for unlicensed online poker wagers recorded between 2006-to-2011.

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