Fox Corporation CEO Lachlan Murdoch says his company is actively working with regulators to obtain gaming licenses to activate the option to acquire an 18.6% stake in FanDuel at nearly $2.2 billion below its estimated market value.
If the deal goes through, it could create valuable synergies akin to those Penn Entertainment was hoping for with its partnership with ESPN. First, it would reestablish Fox’s footprint in the sports betting space following the demise of Fox Bet. As the same time, it would provide FanDuel with access to marketing opportunities through Fox’s media empire.
Per Sportico, while speaking at the Goldman Sachs Communacopia and Technology Conference this week, Murdoch valued Flutter-owned FanDuel at $35 billion. That valuation implies Fox’s almost 20% potential stake in FanDuel is worth nearly $6.5 billion.
However, that’s $2.2 billion less than the $4.3 billion Fox suggested it would cost to close the deal in financials released last month.
Murdoch told Goldman Sachs conference attendees that the opportunity isn’t one Fox will let pass.
We’re not going to leave $2 billion on the table.
Notably, before Fox can finalize the transaction, it must become a licensed gaming operator. Earning a license is onerous, but, as Murdoch noted, Fox is working with regulators to do just that.
Fox’s Buy-In Could Cement FanDuel’s US Dominance
Fox gained the FanDuel buy-in option thanks to Flutter’s purchase of The Stars Group (TSG) in 2020. The sale shifted Fox’s option to acquire equity in TSG, with which it launched the now-shuttered Fox Bet, to FanDuel.
However, while the sale gave Fox the right to buy into FanDuel, the companies disputed the purchase cost. In 2022, an arbitrator ruled Fox had until 2030 to activate its FanDuel buy-in option based on a US$20 billion valuation. Increasing by 5% annually, the initial $3.7 billion cost becomes approximately $4.3 billion today.
At the time of the TSG deal, Flutter CEO Peter Jackson, now the chief executive of the merged company, said Flutter would continue to collaborate on Fox Bet while building the FanDuel brand in the US.
In a release detailing the merger, Jackson said the combination represented a “great opportunity.”
The combination will turbocharge our existing four-pillar strategy and provide world-class capabilities across sports betting, gaming, daily fantasy sports and poker, as well as greater geographical and product diversification.
However, Fox and Flutter shuttered the ailing Fox Bet sports betting platform last year.
Now, it seems Fox intends to focus on FanDuel, with Murdoch saying the purchase will offer “an opportunity to further engage with our viewers.”
Gaming industry analysts have noted that Fox’s purchase of a stake in FanDuel could have broad implications for US sports betting. FanDuel already leads in US market share, ahead of DraftKings, BetMGM, and Caesars Sportsbook.
Fox may also be more inclined to allow a FanDuel IPO, although that would be contingent on the market climate.
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