The United States is seen as the next big growth market for sports betting, spawning a series of transatlantic partnerships tapping into European expertise such as Britain's William Hill being bought by Caesars Entertainment in a 2.9 billion pound ($3.9 billion) deal announced in September..

Paddy Power Betfair's owner Flutter, which merged its U.S. business with FanDuel in 2018, said it was exercising an option ahead of schedule and buying a 37.2% stake from Fastball with a combination of cash and shares.

The deal also leaves the door open to further involvement by U.S.-based FOX Sports, owned by Fox Corporation, giving it the option to buy 18.5% of FanDuel in July next year.

"Maintaining our ownership stake in Flutter signifies our long-term commitment to Flutter, and ongoing confidence in management's ability to execute against the fast growing US opportunity," Lachlan Murdoch, Executive Chairman and CEO of Fox Corporation said in a statement.

"FOX's audiences have proven to be highly engaged with free to play and wagering content, and we are excited to offer them access to products from Flutter's market leading stable of US brands," Murdoch added.

Flutter said it will raise 1.1 billion pounds ($1.48 billion) in equity to partly fund the purchase, with Fox Corporation participating in the capital raising.

"We gave Fox the option to acquire a stake in the business in July 2021 at fair market value, and we continue to provide them with that option, and we will be in dialogue with them to see whether they're interested in pursuing it or not," Flutter Chief Executive Peter Jackson said after the announcement.

Jackson said Fox held 2.6% of Flutter Entertainment ahead of the placing.

The deal would simplify the position of FOX Bet, in which Fastball was given an interest as part of Flutter's 2019 merger with Canada's Stars Group, creating one of the world's largest online betting and gaming operators, Flutter said.

"We're increasing our exposure to the U.S. at a time when the regulation of sports betting and online gaming is accelerating," Jackson said on a conference call.

"We are also acquiring the stake at a material discount to our own estimate of the intrinsic value of the business."

London-listed shares in Flutter jumped 10% to 147.10 pounds at 1400 GMT, having earlier hit an all-time high.

Flutter plans to pay for the stake through a combination of $2.09 billion in cash and the issue of about 11.7 million new ordinary shares directly to Fastball.

($1 = 0.7437 pounds)

(Reporting by Yadarisa Shabong and Muvija M in Bengaluru; Editing by Shinjini Ganguli and Alexander Smith)

By Graham Fahy