The transaction implies an enterprise value of $11.2 billion for FanDuel, roughly half that of Nasdaq-listed rival Draftkings, valued at $21.9 billion. The deal is pitched at 13-times FanDuel's annual revenue run-rate of approximately $860 million.
Enterprise value is the underlying value of a business once cash is stripped out and debt added.
TAPPING INVESTORS FOR CASH
Part funded by a share placing to raise £1.1 billion at a 2.1% discount to yesterday’s closing price, 11.7 million shares will be handed to Fastball as part of the agreement.
The deal will take Flutter’s stake in FanDuel up from 57.8% and will accelerate its exposure to the US, one of the fastest-growing betting markets as it opens up after sports betting was legalised in 2018.
It will also lift uncertainty over FanDuel, said analysts, which have overhung the shares.
As part of the deal the seller Fastball will give up its interests in FOX Bet with Fox Sports participating in the placing.
DEAL A ‘RELATIVE STEAL’, SAYS ANALYST
‘Given that the sports betting positioning of FanDuel versus Draftkings remains relatively tight but (very) convincingly first and second, and factoring in the additional reach of Fox, the FanDuel valuation would seem to be a relative steal.’
Flutter expects net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) to be less than three-times following the transaction.
The medium term-target range is between one and two-times.
Flutter shares trade 1.3% higher at £144.90.