Both sides declared victory in the arbitration case Fox filed last April against Flutter, the majority owner of FanDuel. The decision from New York’s Judicial Arbitration and Mediation Services was announced late this afternoon.
“Fox is pleased with the fair and favorable outcome of the Flutter arbitration,” the company said in an emailed statement sent late Friday afternoon.
“Today’s ruling vindicates the confidence we had in our position on this matter and provides certainty on what it would cost Fox to buy into the business, should they wish to do so,” Flutter CEO Peter Jackson said in a statement released Friday evening.
The dispute comes down to money. Fox has the right to buy an 18.6% stake in FanDuel. In determining how much to pay for that stake, Fox wanted to value FanDuel at $11.2B, which is a valuation Flutter used two years ago. Flutter wanted to determine a new valuation after completing an IPO for FanDuel, which would set a much higher price that Fox would have to pay.
When Fox filed the suit, it asked the arbitrator to rule, first, if it has a valid option to acquire 18.6% of FanDuel. The arbitrator ruled that Fox has a 10-year option -- until December 2030 -- to buy that stake. Fox then asked the arbitrator to determine a price, and the arbitrator valued FanDuel at $22B, saying Fox had to pay $3.72B with a 5% annual escalator.
“Fox has no obligation to commit capital towards this opportunity unless and until it exercises the option,” Fox’s statement says. That means that Fox can wait 10 years before buying that stake, which at that point would be priced at $6.06B.
Fox asked the arbitrator to rule whether Flutter is allowed to take FanDuel public, as it had planned. The arbitrator ruled that Flutter can establish an IPO for FanDuel in the United States only after Fox’s consent, or through approval by the arbitrator.
What makes this dispute so unusual is the relationship that already exists between Fox and Flutter.
In the fall of 2019, Fox set up a 50-50 joint venture with The Stars Group to launch Fox Bet. The Stars Group put up the cash, and Fox focused on promotion. This fit Fox’s strategy as it pertains to the sports wagering business. Rather than just accept gambling-related advertising, Fox wanted to become an operator in the sports wagering space. But then Flutter bought Stars later in the fall of 2019, essentially, setting up Fox Bet as a direct competitor with FanDuel. Fox Bet tried to define its niche as catering to casual gamblers with FanDuel going after more serious gamblers.
In its arbitration filing, Fox asked the arbitrator to determine if Flutter has to spend as much money on Fox Bet as it spends on FanDuel. The arbitrator ruled that Flutter still has to fund Fox Bet, but it is not obligated to fund it at the same level as FanDuel. FoxBet operates in four states. FanDuel is live in 16 states, with three more set to launch by early next year.
The ruling adds clarity on the path forward for FoxBet, which has failed to break through in spite of Fox’s brand and heavy promotion on its pre-game shows.
Fox has until Aug. 23 to exercise its right to purchase up to 50 percent of the operations of FoxBet, its Super6 free-to-play game and PokerStars US, which also was included in the Stars acquisition. It would need to become licensed as a U.S. bookmaker in order to increase the stake it holds now.
Should Fox opt not to exercise those options, either side has the right to terminate the FoxBet business. Flutter would retain ownership of Super Six and Poker Stars, while the use of the FoxBet brand reverts to Fox.
FoxBet accounts for only one percent of handle in both Pennsylvania and Michigan in September. New Jersey and Colorado, the other two states in which it operates, do not report handle by individual operators
Fox’s statement ends with this message: “This optionality over a very meaningful equity stake in the market leading U.S. online sports betting operation confirms the tremendous value FOX has created as a first mover media partner in the U.S. sports betting landscape.”
Senior writer Bill King contributed to this story.
