Flutter to raise FanDuel stake to 95% ahead of US IPO

The deal will be funded with just under $2.1b in cash and 11.7m new Flutter shares

UK gambling giant Flutter Entertainment is taking over nearly all of FanDuel that it doesn’t already own ahead of a likely US initial public offering.

On Thursday, the UK-listed Flutter announced plans to acquire a 37.2% stake in the FanDuel Group from Fastball Holdings, a consortium of investors led by private equity group KKR. The deal will boost Flutter’s FanDuel stake from 57.8% to 95%, with the remaining 5% held by regional casino operator Boyd Gaming.

The US$4.175b (£3.13b) deal will be funded with just under $2.1b in cash and 11.7m new Flutter shares. For the cash portion, Flutter will use a combination of cash on hand and £1.1b via a new equity placing. Investors will get to weigh in on the proposed acquisition at an extraordinary general meeting before year’s end. 

Flutter said the deal “removes considerable uncertainty with respect to buyout obligations of Fastball’s stake” and eliminates Fastball’s economic interest in the FOX Bet brand.

Flutter’s May 2018 deal to acquire its controlling stake in FanDuel included options to buy out Fastball in two tranches in 2021 and 2023 “at prevailing market valuations” but also put “constraints” on the sum Flutter would have to pay. Flutter claims the accelerated buyout offers Fastball price certainty and liquidity, among other benefits that might not materialize should the firms stick to their original timetable.

Other justifications include “increasing Flutter’s flexibility to optimize US structure over time,” which almost certainly will include spinning off the FanDuel Group into a standalone US-listed entity. FanDuel rival DraftKings has enjoyed a spectacular rise in its share price since the company went public this spring.