Fox, the Murdoch-owned media corporation, has filed an arbitration claim against Flutter, one of the largest gambling companies in the world, in a dispute over the value of its stake in the fast-growing sports betting platform FanDuel.
Fox has the option to buy an 18.5 per cent stake in FanDuel in July and says it should be allowed to do so at the same price Flutter paid when it upped its own stake in the company in December. That deal gave FanDuel an enterprise value of $11.2bn.
Flutter is attempting to press for a higher price, saying the December deal was set at a discount to FanDuel’s fair value.
The valuations of US sports betting companies have rocketed as the popularity of the activity increases and more states legalise such gambling to bolster tax receipts in the wake of the coronavirus pandemic.
In a statement, Fox confirmed a lawsuit was filed confidentially with New York’s Judicial Arbitration and Mediation Services “by consent of the parties”. Flutter declined to comment on the case.
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The dispute comes as Flutter considers listing a part of the business. Management believes Flutter’s UK-listed shares do not properly reflect the value of FanDuel which, the company points out, has the largest market share in many of the US states that have regulated sports betting.
Shares in DraftKings, a FanDuel rival that listed via a merger with a blank cheque company last April, have more than tripled since then. Shares in the casino company Penn National, which bought the sports and pop culture blog Barstool Sports in January 2020, have increased about 250 per cent since then.
Fox has been attempting to expand its interests in sports betting in partnership with Flutter, but the dispute threatens to turn the companies into rivals. If it goes unresolved, Fox is prepared to aggressively promote Fox Bet, its own sports betting app, in competition with FanDuel, according to people familiar with the matter.
Fox obtained its option to buy an 18.5 per cent stake in FanDuel at fair market value as part of Flutter’s £10bn merger with The Stars Group, which operated a sports betting platform with Fox.
In the December deal that valued FanDuel at $11.2bn, Flutter upped its stake to 95 per cent by buying the 37 per cent stake held by Fastball Holdings, a consortium of investors led by the private equity group KKR. Fox helped fund the deal by buying new Flutter shares.
Peter Jackson, chief executive of Flutter, told the Financial Times last month that he believed Flutter’s US business would ultimately be bigger than its UK and Australian businesses put together thanks to the growth of the market.
CNBC first reported the lawsuit.