FanDuel’s days of independence are over
Paddy Power Betfair has confirmed it will merge its US business with fantasy sports company FanDuel to target the US sports betting market that will open up a lucrative new stream of revenue.
Paddy Power Betfair will contribute its existing US assets worth $612m along with $158m of cash to take a 61% stake in the combined business, with existing FanDuel investors owning 39%. The plan is for Paddy Power Betfair to own the entire business after five years.
The cash element will be used to pay down FanDuel’s net debt of $76m (as at 31 March 2018) and fund working capital of the combined business.
Dublin-based Paddy Power Betfair will have operational control of the business, which will become a fully consolidated subsidiary.
For FanDuel the deal is another milestone in the journey from Edinburgh startup to billion dollar ‘unicorn’ in less than a decade. All five co-founders have already left the company which is now headquartered in New York.
Its accounts showed it made a loss in its last financial year although Nigel Eccles, one of the founders, told Daily Business last month that it made a profit in the fourth quarter.
It still employs substantial numbers in Edinburgh and Glasgow and it was not clear what plans the new combined business has for these outstations.
Paddy Power Betfair chief executive Peter Jackson said in a statement: “This combination creates the industry’s largest online business in the US, with a large sports-focused customer base and an extensive nationwide footprint,”
The deal follows speculation last week (Daily Business 16 May) soon after the US Supreme Court made a landmark ruling that could allow states across the country to legalise sports betting.