Paddy Power Betfair has opened discussions about the possible acquisition of daily fantasy sports company FanDuel as a way of entering a potential U.S. sports betting market.
The U.S. Supreme Court decision to overturn a federal ban on sports betting is expected to set off a flurry of moves and mergers as companies jockey for space in the newly created market. Sports betting is expected to begin quickly in New Jersey—which challenged the federal ban—Delaware and Mississippi and several other states that have introduced sports betting legislation. As many as 32 states could eventually move to allow sports betting, according to analysts.
Meanwhile, FanDuel and its main rival DraftKings have long said they would look to enter the sports betting market if the high court struck down the federal ban. Paddy Power officials said a merger between its U.S. division and FanDuel is being explored as a way for the Irish bookmaker to enter this new market.
“Paddy Power Betfair plc notes the media speculation, and confirms it is in discussions, regarding a potential combination of the Group’s US business and FanDuel to create a combined business to target the prospective US sports betting market,” PPB said in a statement posted on its website. “Discussions are ongoing and there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction.”
The company added that a deal would “create a combined business to target the prospective U.S. sports betting market.”
The Supreme Court decision has helped stock values for a number of gaming companies that have taken early steps to enter the market, such as William Hill Plc, which has contracted to run a sportsbook at Monmouth Racetrack in Oceanport New Jersey that is expected to be the first facility in the state to offer sports betting.
The Paddy Power announcement caused its shares to rise about 5.5 percent, according to reports.
An acquisition of FanDuel “would improve the chances of Paddy Power Betfair establishing a foothold in the U.S. sports betting market,” Morgan Stanley analysts said in a note to clients.
Other analysts noted that the acquisition would give Paddy Power and established U.S. brand and tech platform as well as a large database of players likely to be interested in sports betting. However, it should be noted that not all states that consider legalizing sports betting will include an online component.
Paddy Power Betfair already runs the leading U.S. horse racing television and betting network and has an online casino presence in New Jersey which contributed $140 million or around 6 percent of its revenue last year, according to Reuters. It also entered the U.S. fantasy sports market last year with a $48 million acquisition of the DFS platform DRAFT.
News of the talks was disclosed by the website Legal Sports Report, which said Paddy Power is likely offering less than $1 billion for the DFS site. In 2017, when the company attempted a merger with DraftKings, it listed an equity valuation at $1.2 billion.
In March, it was also reported that that FanDuel was considering going public through a reverse merger with Platinum Eagle Acquisition Corp., a special-purpose acquisition company formed by media executive Jeff Sagansky.
Regardless of how the merger talks go, FanDuel CEO Matt King has been actively promising that his company will begin sports betting quickly.
“We are working with the regulators on what state regulation will look like,” he said during a recent appearance on CNBC’s Squawk Alley. “Suffice to say, we have the product design, we have our tech team working—we will be ready to go.”
King said he thinks in-play sports betting will be popular as it is introduced in the U.S. and could be a major driver for its products.
“If you think about the traditional sports book experience, a lot of it is pre-play, or betting on it before it happens,” King said. “The innovation that is going to come into the U.S., we think, will be around in-play or cash-out functionality over time.”
King said a sport like professional tennis could see an explosion in popularity due to in-play betting. he added.
“The beauty of tennis is that you could literally bet on every single hit in the match—every single point—and so it creates a lot of opportunity for people to engage in the sport.”
DraftKings has also moved quickly to announce it intends to enter the sports betting market. The company said in a press statement that it has been preparing to launch sports betting products ever since the Supreme Court agreed to hear the challenge to the federal ban.
DraftKings chief executive Jason Robbins says he expects several states to formally legalize sports betting before the start of the NFL season in September. He said DraftKings will push for regulations in those states that put “smart consumer protections” in place without being overly restrictive.
