Flutter considers FanDuel spinout; investors want DraftKings multiple

Flutter, the U.K.-based mobile gaming company that owns 95% of FanDuel, is considering spinning out FanDuel as a separately traded company to trade on a U.S. exchange, according to people familiar with the matter.

A separation of FanDuel isn’t assured or imminent, said the people, who asked not to be named because the discussions are private. FanDuel is Flutter’s crown jewel, which may spur Flutter CEO Peter Jackson to keep it.

Fox Sports, which owns 2.5% of Flutter, has an option to buy an additional 18.5% stake in FanDuel in July. Fox also has a 10-year option to buy half of the Stars Group’s US business, another asset owned by Flutter. (Stars Group owns Fox Bet.) Clearing up Fox’s FanDuel ownership is a complicating factor that may delay a spinout, said the people.

Spokespeople for FanDuel and Fox Sports declined to comment.

Several investors in Flutter have expressed frustration that Flutter is trading at a discount to DraftKings despite FanDuel’s status as the largest U.S. player, said the people, who asked not to be named because discussions are private. When Flutter announced it was acquiring another 37.2% stake in FanDuel in December for $4.5 billion, part of the logic behind the transaction was to allow for an eventual spin of FanDuel, the people said.

DraftKings’ market capitalization is more than $28 billion. The company booked $644 million in revenue in 2020, and predicts it will have $900 million to $1 billion in revenue for 2021.

Flutter, which trades on the London Stock Exchange, has a market capitalization of £27.7 billion (about U.S. $39 billion), which is less than 40% higher, even though FanDuel alone reported $967 million in revenue in 2020, which is 50% higher — and that doesn’t include Flutter’s other assets. Moreover, FanDuel claims to be the market leader in U.S. sports gambling, with 40% market share.

A potential spinout could happen at a crucial time for mobile sports betting in the U.S., as 19 states are set to vote this year on whether to legalize it, including Texas and New York, the second- and third-most populous states.

Flutter is a holding company for betting sites, such as Paddy Power, Betfair, Fox Bet, PokerStars and TVG. The other assets, with lower growth profiles, may be weighing down FanDuel’s value. FastBall Holdings, a consortium of venture capital firms CapitalG (the late stage investing arm of Google parent company Alphabet), Comcast Ventures, KKR, Verizon Ventures, NBC Sports Group, and Shamrock Capital, owns 7% of Flutter after the December FanDuel acquisition.

Disclosures: Comcast Ventures is the venture capital arm of Comcast, which owns NBCUniversal, the parent company of both NBC Sports Group and CNBC.

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