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Fox, the Murdoch-owned media company, has filed an arbitration lawsuit against Flutter, one of the world’s largest gambling companies, in a dispute over the value of its stake in the sports betting platform fast growing FanDuel.
Fox has the option to buy an 18.5% stake in FanDuel in July and says it should be allowed to do so at the same price Flutter paid when it increased its own stake in the company in December. The deal gave FanDuel an enterprise value of $ 11.2 billion.
Flutter is trying to push for a higher price, saying the December deal was downgraded to FanDuel.
Valuations of U.S. sports betting companies have exploded as the business’s popularity grows and more states legalize these games to bolster tax revenue in the wake of the coronavirus pandemic.
In a statement, Fox confirmed that a lawsuit had been filed confidentially with New York City Arbitration and Mediation Services “with the consent of the parties.” Flutter declined to comment on the matter.
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The dispute arises as Flutter plans to list part of the business. Management believes that Flutter’s UK-listed shares do not properly reflect the value of FanDuel, which the company points out has the largest market share in many US states that have regulated sports betting.
DraftKings, a rival to FanDuel that was listed through a merger with a blank check company last April, has seen its stock more than triple since then. Shares of casino company Penn National, which bought sports and pop culture blog Barstool Sports in January 2020, have risen around 250% since then.
Fox has tried to expand its sports betting interests in partnership with Flutter, but the dispute threatens to turn the companies into rivals. If the issue is not resolved, Fox is ready to aggressively promote Fox Bet, its own sports betting app, in competition with FanDuel, according to people familiar with the matter.
Fox was granted its option to buy an 18.5% stake in FanDuel at fair market value as part of Flutter’s £ 10 billion merger with The Stars Group, which operated a sports betting platform with Fox.
In the December deal that valued FanDuel at $ 11.2 billion, Flutter increased its stake to 95% by buying the 37% stake held by Fastball Holdings, a consortium of investors led by the private equity group. KKR. Fox helped fund the transaction by purchasing new Flutter shares.
Peter Jackson, managing director of Flutter, told the Financial Times last month that he believes Flutter’s US business will ultimately be bigger than its UK and Australian businesses combined thanks to the growing market.
CNBC first reported the lawsuit.
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