Here’s the first deal of the legal sports betting era: Paddy Power Betfair is buying FanDuel
Earlier this month, the U.S. Supreme Court gave the go-ahead to legal sports gambling. Now we have the first result of that deal: Paddy Power Betfair, a U.K.-based sports-betting heavyweight, is buying FanDuel, a big fantasy sports operator.
This is the type of combination we are likely to see more of in the future. It pairs someone who already handles legal sports gambling with someone who has a big digital footprint in the U.S. sports market.
FanDuel is one of two “daily fantasy” companies that sprang onto the scene a few years ago, and was at one point supposed to be worth more than a billion dollars. It is now likely worth much less than that, though the terms of the deal don’t lay out a precise value for the company.
Paddy Power is paying for FanDuel with the equity of its relatively modest U.S. business, and will own 61 percent of the combined company, with the ability to eventually own all of it. It is also contributing $158 million in cash to pay down FanDuel’s $76 million in debt and to fund the operations of the new business (which means if you’re trying to figure out what this deal is worth to FanDuel’s investors, you can’t count the value of that cash).
FanDuel had revenue of $124 million last year, and Paddy Power’s U.S. group had revenue of $141 million. Both were unprofitable.
The Supreme Court’s ruling doesn’t automatically legalize sports betting across the U.S. Instead, it gives individual states the right to legalize sports betting, which means for the near future, sports betting will be okay in some states and not others. New Jersey, for instance, is raring to go and could be operational in weeks.
