Flutter Entertainment: Arbitrator backs Flutter and values ​​FanDuel at $20 billion

Flutter is pleased to announce that the arbitration results confirm:

• FOX Corporation (“FOX”) to acquire an 18.6% stake in FanDuel Group (“FanDuel”) at an exercise price based on FanDuel’s $20 billion valuation

• This is based on an implied valuation of $11.2 billion for FanDuel based on fair market value as of December 2020, the date Flutter acquired 37.2% of Fastball Holdings LLC (“Fastball”)

• Exercise price subject to 5% annual compounded book value adjustment as of December 2030 date of possible FOX exercise

• As of today, that equates to a valuation of $22 billion for FanDuel and a cost of $4.1 billion for FOX to acquire an 18.6% stake

Arbitration award

Flutter’s relationship with FOX is subject to a binding arbitration mechanism whereby the parties can resolve any disagreements.

1. FOX Option acquires 18.6% stake in FanDuel

On April 7, 2021, FOX initiated arbitration proceedings regarding the terms and related issues of FOX’s option to acquire an 18.6% stake in FanDuel (the “Option”).

The tribunal found that the price payable for the option was based on FanDuel’s fair market value as of December 3, 2020, Date Flutter announces acquisition of Fastball’s 37.2% stake in FanDuel (deal details here).The tribunal has determined that the fair market value of FanDuel as of December 2020 is $20 billion. This is in stark contrast to the implied valuation of $11.2 billion for FanDuel when Flutter acquired the stake from Fastball.

FOX has a 10-year period from December 2020 to exercise the option, subject to a 5% annual compounded book value adjustment if it so desires. Exercise must be paid in cash and options can only be exercised in full. Permission from FOX is required to exercise the option, and if FOX is not exercised within this time frame, the option will expire.

As of November 4, 2022, the option price is $4.1 billion, which includes FanDuel’s 18.6% strike price of $3.7 billion plus a 5% annual book value adjustment.

1. Supplementary items

Following the commencement of arbitration proceedings in April 2021, FOX submitted two additional matters for consideration.

First, FOX alleges that Flutter failed to provide commercially reasonable resources for the operation of FOX Bet. The tribunal completely rejected FOX’s claims and ruled that Flutter believed that FOX Bet had obtained commercially reasonable resources.

This means that FOX continues to retain the right to acquire up to 50% of TSG US¹, which can only be exercised with permission. If FOX is not licensed and does not exercise its option with respect to TSG US, the parties have the right to terminate the agreement related to FOX Bet in August 2023. If either party does so, this will result in the termination of the FOX betting business. In this case, Flutter will retain ownership of PokerStars US and Super6, while the FOX Bet brand name will be used by FOX.

The tribunal’s remaining question is whether, if that happens, FOX has the right to participate in the IPO of FanDuel’s parent company, and if so, under what conditions. Flutter has agreed that it will not proceed with any potential IPO, if any, until an arbitral tribunal has resolved the remaining issues or the parties have reached an agreement on the matter. The arbitrator is expected to make a binding decision on this point in early 2023.

Flutter CEO Peter Jackson commented:

“Today’s ruling demonstrates our confidence in our position on the matter and establishes the cost of FOX’s acquisition of this business, if they so desire. FanDuel wins in the U.S. market and is the clear #1 operator , its superior market-leading product and efficiency in acquiring customers at scale drove this position. The team remains focused on maintaining our lead and we look forward to updating the market on our progress on the 16th U.S. Capital Markets Day^th November. “

The person responsible for arranging for this announcement on Flutter’s behalf is Edward Traynor, Flutter’s Corporate Secretary.

¹ TSG US includes operations from FOX Bet, Super6 and PokerStars US.

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