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.
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“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.