Amid the continuing growth and focus on the sports betting business, Fox Corp. has won the right to buy a piece of FanDuel, the leading U.S. sports-wagering company -- but it comes at a high price.
Arbitration hearings in New York have confirmed that Fox won the right to buy an 18.6% stake in the FanDuel Group from its parent company, with the option price of at least $3.72 billion.
The price Fox would pay comes at a soaring FanDuel valuation of $20 billion -- a 80% premium to a level set in December 2020. By way of comparison, the FanDuel valuation would be five times the value of its nearest competitor DraftKings, a publicly traded company with a value of around $5 billion.
“FanDuel has currently cemented its leading position across the U.S. and maybe just as importantly already reached profitability in second quarter 2022 with expectations for a full year of profit in 2023, a year ahead DraftKings’ expectations,” according to Robert Fishman, media analyst for MoffettNathanson Research.
“Nonetheless, we think it is safe to claim that Fox's current FanDuel option is under water leaving Fox in no rush to exercise in this current market.”
An earlier FanDuel estimate from a Jeffries analyst, projected the company could near $35 million in a few years -- which would push Fox's price tag for buying FanDuel to $6 billion.
Flutter, the owner of FanDuel, had considered taking the company public.
Sports betting has been seen as a key for future growth for many TV networks, media companies, and professional sports leagues -- now legal in some form in 33 states -- in terms of creating greater engagement with TV viewers.
Sports betting revenue nationally through August was up 70% this year over a year ago to $3.97 billion, according to the American Gaming Association.
FanDuel has spent $114.3 million in national TV advertising from November 6, 2021 through November 6, 2022, according to estimates from iSpot.tv -- airing some 22,220 commercials, garnering 8.8 billion impressions.