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    FLTR   IE00BWT6H894

FLUTTER ENTERTAINMENT PLC

(FLTR)
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Flutter Entertainment PLC Accelerated Acquisition of 37.2% of FanDuel

12/03/2020 | 07:46am EST

TIDMFLTR

RNS Number : 4792H

Flutter Entertainment PLC

03 December 2020

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, SOUTH AFRICA OR ANY OTHER STATE OR JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICE SECTION OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

3 December 2020

Flutter Entertainment plc

("Flutter" or the "Company" or the "Group")

Accelerated acquisition of 37.2% of the issued and outstanding units of FanDuel Group Parent LLC ("FanDuel") from Fastball Holdings LLC ("Fastball")

Flutter, the leading global sports betting and gaming group, today announces that it has entered into a conditional agreement to acquire the entire 37.2% interest in FanDuel which is currently held by Fastball for USD$4.175bn (GBPGBP3.131bn(1) ) (the "Transaction").

The Transaction is conditional on Flutter shareholder approval. A circular will be posted to shareholders in due course to convene an extraordinary general meeting, which is expected to take place prior to the end of December 2020.

Key Highlights:

-- Accelerates buy-out of minority investors in US market leader, taking Flutter's stake in FanDuel from 57.8% to 95%

   --    Materially increases exposure to US market, the most attractive sector opportunity today 

-- Takes opportunity to secure stake in FanDuel at a discount to the intrinsic fair value, as well as a discount to its closest peer(2)

-- Discount to fair market value reflects a number of factors, including Fastball's minority position in FanDuel, the provision of price certainty and liquidity to Fastball as well as allowing it to expedite the payment it receives for its full stake

   --    Removes considerable uncertainty with respect to buyout obligations of Fastball's stake 

-- Simplifies stakeholder arrangements, increasing Flutter's flexibility to optimise US structure over time

   --    Terminates Fastball's economic interest in FOX Bet 

-- Consideration for the Transaction is expected to be satisfied through a combination of $ 2.088 bn in cash and the issue of approximately 11.7m new Flutter ordinary shares directly to Fastball. The cash element will be funded through cash on balance sheet and an equity placing to raise approximately GBP 1.1 bn. The terms of the Placing were announced separately today

-- Following completion of the Transaction, the Group expects financial leverage at the end of 2020 to be less than 3.0x Adjusted EBITDA, with the Group's medium-term leverage target of 1.0x-2.0x retained

Commenting on the Transaction, Peter Jackson, Flutter Chief Executive, said

"Flutter's initial acquisition of a controlling stake in FanDuel in 2018 has been transformational for the shape of the Group. Our number one position in the crucial US market is built on many of the assets we acquired through that transaction, supported by the broader Group's capabilities. Our intention has always been to increase our stake in the business and I'm delighted to be able to do so earlier than originally planned and at a discount to its closest peer.(2)

I would like to take this opportunity to thank our partners in Fastball for their tremendous support over the last 2 1/2 years and for their ongoing commitment to Flutter as soon-to-be shareholders in the wider Group. We look forward to continuing to grow our US business, alongside our key media partner FOX, as further states move to regulate sports betting and gaming."

Commenting on the Transaction, Lachlan Murdoch, Executive Chairman and CEO of Fox Corporation said

"We are delighted to participate in this capital raising. 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. 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."

Analyst and Investor Presentations

The Group will host an analyst and investor conference call this afternoon at 2:00pm (IST/GMT). Participants must register at the link provided below to obtain the relevant dial in details

https://cossprereg.btci.com/prereg/key.process?key=PBYD9RPGQ

A replay facility will also be available on our corporate website: https://www.Flutter.com/investors

For further information on the Announcement, please contact:

 
 Flutter Entertainment plc 
  Jonathan Hill, Chief Financial Officer 
  David Jennings, Group Director of Investor 
  Relations and FP&A                                + 353 87 951 3560 
  Ciara O'Mullane, Investor Relations               + 353 87 947 7862 
  Liam Kealy, Investor Relations                    + 353 87 665 2014 
 Press: 
  Fi Thorne, Corporate Affairs                      + 44 75 2111 4787 
  Lindsay Dunford, Corporate Affairs                + 44 79 3197 2959 
 Davy (Joint Financial Adviser and Joint 
  Sponsor)                                         +353 (0)1 679 6363 
 John Lydon 
  Brian Garrahy 
  Ronan Veale 
 Goldman Sachs International (Joint Financial 
  Adviser and Joint Sponsor)                     +44 (0) 20 7774 1000 
 Anthony Gutman 
  Charlie Lytle 
  Nick Harper 
  Jimmy Bastock 
 
 
 Drury Communications 
  Billy Murphy           + 353 1 260 5000 
 
 
 Finsbury (Media Enquiries) 
  James Murgatroyd               +44 (0) 77 6825 4911 
  Robert Allen                   +44 (0) 75 5444 1363 
 

Moelis & Company LLC acted as exclusive financial advisor to Fastball Holdings LLC.

Flutter Entertainment plc

("Flutter" or the "Company" or the "Group")

Accelerated acquisition of 37.2% of the issued and outstanding units of FanDuel Group Parent LLC ("FanDuel") from Fastball Holdings LLC ("Fastball")

1. Background

In May 2018, Flutter (then Paddy Power Betfair plc) announced the acquisition of an initial controlling stake in FanDuel Ltd via a cash investment of $158m and the transfer of its then existing US assets (principally TVG and its New Jersey online casino) into a newly merged US group. Following a subsequent market access deal with Boyd Interactive Gaming LLC ("Boyd"), Flutter's stake in FanDuel stood at 57.8%.

A mechanism was put in place to facilitate the sale of Fastball's remaining 37.2% stake in FanDuel to Flutter in two tranches in July 2021 and July 2023 at prevailing market valuations. This mechanism contained constraints on the amount Flutter could be obliged to pay to acquire the stake, potentially leaving Fastball continuing to hold material levels of an illiquid minority share in the business for an indefinite period. In agreeing the terms of the Transaction we are announcing today, Fastball is able to realise a considerable return on its original investment in FanDuel while trading the discount for price certainty, liquidity and an opportunity to expedite the payment it receives for its full stake. From Flutter's perspective, today's announcement accelerates the transfer of the minority stake at what we believe to be a discount to the intrinsic fair value of the business, taking into account the business's significant growth opportunities, and at a discount to FanDuel's closest peer.(2)

2. Strategic rationale for Transaction

It increases exposure to the most attractive market opportunity in the sector today

The ongoing regulation of online sports betting and gaming in multiple states represents the single biggest market opportunity for Flutter today. Since the repeal of the Professional and Amateur Sports Act ("PASPA") in May 2018, the pace with which states have legislated online sports betting, and in some cases online gaming, has exceeded the Group's initial expectations.

The potential size of the US total addressable market ("TAM") for online betting and gaming continues to grow. By the end of 2021, Flutter expects its online sports betting products to be available in US states accounting for approximately one third of the US population. Flutter expects its online gaming products to be available in four states, equating to 11% of the US population. In both cases, the roster of regulated states does not yet include any of the four most populated states, namely California, Texas, Florida or New York.

To put the full scale of the US opportunity into context for Flutter, the states that we expect to be live in by the end of 2021 are expected to be worth c.$9.1bn in gross gaming revenue terms at maturity.(3) This makes them almost as large as the regulated online markets of the UK, Ireland and Australia combined.(4) Based on the earnings guidance provided in the Group's Q3 trading statement (11 November 2020), Flutter expects to generate online EBITDA from these three regulated markets of over $1bn in 2020.

It is unclear at this point how many further states will regulate online sports betting and gaming. Flutter estimates that for each incremental 5% of the US population that is given access to regulated sports-betting and regulated online gaming, the TAM could increase by c.$850m and c.$1.3bn respectively.

It increases Flutter's share in the US market leader, a business with key competitive advantages

FanDuel is the market leader in the US online gaming market today. The business enjoys several key advantages over competitors. These are:

(i) The FanDuel player database and brand which provide a structural cost advantage in the acquisition of sportsbook/gaming customers at scale

(MORE TO FOLLOW) Dow Jones Newswires

12-03-20 0745ET

Stocks mentioned in the article
ChangeLast1st jan.
0X (ZRX/USD) -3.75% 0.2489 End-of-day quote.65.38%
BUILDERS FIRSTSOURCE, INC. -2.54% 82.1 Delayed Quote.26.54%
DOW JONES AFRICA TITANS 50 INDEX -0.22% 479.51 Real-time Quote.4.86%
DOW JONES SOUTH AFRICA(ZAR) 0.01% 2122.01 Real-time Quote.8.00%
FLUTTER ENTERTAINMENT PLC -1.43% 148.2 Real-time Quote.15.96%
FOX CORPORATION -1.09% 34.6 Delayed Quote.13.93%
MOELIS & COMPANY 0.69% 49.34 Delayed Quote.28.59%
NEWS CORPORATION -1.40% 21.17 Delayed Quote.16.32%
S&P AFRICA 40 INDEX -0.38% 158.93 Real-time Quote.4.70%
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Financials
Sales 2022 7 497 M 9 067 M 9 067 M
Net income 2022 -26,5 M -32,1 M -32,1 M
Net Debt 2022 4 224 M 5 109 M 5 109 M
P/E ratio 2022 -3 625x
Yield 2022 0,05%
Capitalization 23 385 M 28 283 M 28 283 M
EV / Sales 2022 3,68x
EV / Sales 2023 3,07x
Nbr of Employees 16 813
Free-Float 96,9%
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Number of Analysts 26
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Jeremy Peter Jackson Chief Executive Officer & Director
Jonathan Stanley Hill Chief Financial Officer & Director
Gary W. McGann Non-Executive Director
Nancy Cruickshank Independent Non-Executive Director
Alfred F. Hurley Independent Non-Executive Director
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