FanDuel Acquired by Paddy Power Betfair
Fantasy-sports startup FanDuel is being acquired by U.K.- and Ireland-based sports-betting giant Paddy Power Betfair, the two companies announced on Wednesday morning. Under the deal, the two companies will merge their U.S. businesses to prepare for legalized sports betting.
Both companies expect the deal to close in Q3. Paddy Power Betfair told investors Wednesday that it will contribute its U.S. assets as well as $158 million in cash, which will be used to pay down existing FanDuel debt. The European company will hold 61% of the combined U.S. business upon completion of the deal and have operational control. Paddy Power Betfair has the option to raise its stake to 80% after three years, and 100% after five years.
FanDuel had revenue of $124 million in 2017, and 1.3 million active customers, according to Wednesday’s disclosures. The company claims to have over 40% market share of the U.S. daily fantasy sports market, with 7 million registered customers across 40 states. FanDuel had raised more than $416 million from investors including Comcast Ventures, Verizon Ventures, the NBC Sports Group, and others.
The acquisition comes just a week after the U.S. Supreme court struck down the Professional and Amateur Sports Protection Act of 1992, which had outlawed sports betting nationwide, with the exception of Nevada and some more limited betting in three other states. Legalized sports betting is a key reason for the merger, said Paddy Power Betfair’s CEO Peter Jackson in a statement Wednesday.
“We are excited to add FanDuel to the Group’s portfolio of leading sports brands. This combination creates the industry’s largest online business in the U.S., with a large sports-focused customer base and an extensive nationwide footprint. The Group has leading sports betting operating capabilities globally and strong operations on the ground in the U.S. Together with our substantial financial firepower, we believe we are now exceptionally well placed to target the prospective U.S. sport betting opportunity.”
FanDuel has been developing its own sports betting product, agen sbobet and aims to have it ready once the first states legalize sports wagers later this year. “FanDuel and Betfair US share an enthusiasm for innovation and, as a result of today’s announcement, are prepared to lead the charge into the U.S. sports betting market,” said FanDuel CEO Matt King. “The combination of our brands and team, along with a shared culture and vision for the future, will allow us to create the leading gaming destination for sports fans everywhere.”
Experts disagree about the overall size of the legal U.S. sports betting market. Some have suggested that it could bring in as much as $13 billion by next year, but others are a lot more cautions. GamblingCompliance, a company that tracks the activity across the U.S. and Europe, believes that five states will have legalized sports betting by the end of this year. The company is forecasting that sports betting will generate about $1 billion this year, and between $2 billion and $6 billion per year in five years.
The ultimate size of the market could also have major implications on the media industry, with analysts like Evercore ISI’s Anthony DiClemente predicting that sports betting companies could spend as much as $7 billion on advertising in 2019.