FanDuel Listing Won’t Include FOX Bet, PokerStars, Says Flutter CEO Jackson

Posted on: April 30, 2021, 12:46h. 

Last updated on: July 5, 2021, 08:28h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

A potential spin-off the FanDuel business won’t include the FOX Bet and PokerStars brands, businesses Flutter Entertainment (OTC:PDYPY) CEO Peter Jackson describes as “struggling.”

FanDuel Fox
Flutter CEO Peter Jackson pictured above. He’s bullish on FanDuel growth despite a tiff with Fox. (Image: The Irish Times)

Jackson made the remarks on the Irish company’s first-quarter earnings call yesterday. It potentially deals a blow to Fox Corp.’s (NASDAQ:FOXA) hopes that those units would be packaged with a FanDuel initial public offering (IPO). The bookmaker and the media giant are locked in a legal tussle relating to Fox’s rights to acquire 18.6 percent of FanDuel.

As previously discussed, Flutter is giving consideration to a potential US listing of a small part of FanDuel Group,” said Jackson on the call.

“No decision has yet been made, but should we proceed with such a transaction, the assets of FOX Bet (including PokerStars US) would sit outside the perimeter of the listed vehicle,” Jackson continued.

Talk of a FanDuel spin-off has been circulating for months, and it’s something that would likely benefit Flutter investors, Fox included. The media conglomerate is one of the largest shareholders in the sportsbook operator. Flutter investors believe the move would unlock substantial value because FanDuel holds more market share in the US than rival DraftKings (NASDAQ:DKNG), a company with a market capitalization of $22.48 billion.

Flutter Takes Jabs at FOX Bet

In highlighting the strength of FanDuel in the US, including the addition of more than 900,000 new customers in the first quarter, Flutter, for the first time, offered a comparison of that unit against FOX Bet, and it wasn’t pretty for the latter.

In the January through March period, FanDuel drove 91.6 percent of Flutter’s revenue, compared to just 8.4 percent for FOX Bet and PokerStars, according to Jackson. That first-quarter number is up from 89.1 percent for full-year 2020. Last year, FanDuel had sales of $800 million on earnings before interest, taxes, depreciation and amortization (EBITDA) loss of $148 million. FOX Bet notched revenue of just $96 million and was EBITDA negative to the tune of $71 million.

In noting FOX Bet is “struggling,” Jackson added the “product is not as good, because we still have to use the legacy Stars Group sports betting platform. Customer acquisition is lower on the sports side. Fixed costs are higher. As a result, we don’t get the same benefit from operating leverage.”

FOX Bet and PokerStars came into the Flutter fold by way of the company’s $12.2 billion acquisition of the Stars Group (TSG). That deal, which was completed last year, made Flutter the largest online gaming operator in the world.

Acrimony Between Flutter and Fox

Recently, tensions between the media titan and bookmaker are running hot because of a difference of opinion regarding the price Fox should pay for the 18.6 percent of FanDuel it has rights to. That matter is before New York’s Judicial Arbitration and Mediation Services (JAMS).

Fox wants the price Flutter doled out last December when it purchased Fastball’s 37.2 percent interest in FanDuel. That was $4.175 billion, meaning Fox wants to pay $2.08 billion because it’s entitled to buy half that amount in FanDuel. However, Flutter wants to charge what it believes is fair market value — a sum likely far higher than $2.08 billion.

The tiff is intensifying, with Fox recently threatening to pull FanDuel ads from its airwaves. On the call, Jackson said that while Flutter is supportive of Fox, the network isn’t “a huge component of marketing spend for FanDuel.”