Flutter Entertainment, formerly known as Paddy Power Betfair, has agreed to buy The Stars Group in a $6 billion deal. The acquisition, announced on Oct. 2, will effectively combine Flutter’s US bookmakers, FanDuel and Betfair, with the media power of FOX Sports.
Overall, the deal will create the largest online gaming company, by revenue, in the world. The US sports betting market is arguably the primary focus of this merger.
In May 2018, the US Supreme Court overturned a ban on sports betting. The ruling triggered a state-by-state expansion of legalized sports betting. Paddy Power Betfair — now Flutter — scooped up a controlling interest in US-based FanDuel within weeks of the high court’s decision.
Flutter’s planned acquisition of Stars furthers its US goals, while providing a unique media edge.
Media Might Meets Fantasy Base
By acquiring The Stars Group, Flutter will add FOX Bet to its sportsbook portfolio. While the fledgling sports betting app has only launched in two states, it comes with an exclusive 25-year licensing agreement with FOX Sports.
Combining FOX Sports’ media power with FanDuel’s existing 8 million customer base, should give Flutter an advantage going forward.
FanDuel Chief Executive Mike King said, “What you have is the full complement of resources and assets as part of that combination after what, we believe, will be a material opportunity in the US to play out over the new few years.”
So far, the only other media company with a US sportsbook presence is theScore, a small Canadian, digital-only, content company. TheScore launched its New Jersey sports betting app, theScore Bet, on Sept. 3.
Everyone Owns a Piece in Flutter Stars Merger
On its face, the merger is straightforward. Flutter Entertainment plans to buy the Stars Group in an all-stock deal. If approved, Flutter shareholders will end up with 54.64% of the new company, while Stars shareholders will own 46.36%. Other ownership stakes complicated the deal, however.
Boyd Gaming and Fastball Holdings currently have minority ownership stakes in FanDuel. As a result, Flutter has agreed to pay them 12.5% of FOX Bet’s market value growth, measured from the time of the merger’s completion date to July 2023. Fastball Holdings is comprised of FanDuel’s original investors, Comcast Ventures, Verizon Ventures, KKR, capitalG, NBC Sports Group, and Shamrock Capital Advisors.
Flutter’s deal also grants FOX Sports a 10-year option to buy 18.5% of FanDuel’s US business at its 2021 valuation. In May 2019, FOX Sports bought a 4.99% minority stake in The Stars Group, with an option to acquire more.
The merger still has to gain shareholder and regulatory approval. The companies are targeting completion of the merger sometime during the third quarter of next year.
