The Supreme Court Killed a Prohibition on Sports Betting
By Bloomberg May 16, 2018
Paddy Power Betfair is in talks to merge its U.S. unit with closely held website FanDuel as the Irish bookmaker positions itself for expanded sports betting in the U.S. following a Supreme Court ruling this week.
“Discussions are ongoing and there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction,” Dublin-based Paddy Power Betfair said in a statement Wednesday. The deal would “create a combined business to target the prospective U.S. sports betting market.”
The talks may be the start of a wave of deals involving betting companies in the U.S. The nation’s highest court on Monday struck down the federal law that had barred single-game gambling in most of the country, saying it unconstitutionally forced states to maintain their prohibitions. Nevada has been the only state with legal single-game wagering.
Shares of U.S. casino companies and bookmakers such as William Hill Plc rallied on the court decision. Sports gambling could begin in a matter of weeks in casinos and racetracks in New Jersey, which instigated the legal fight by repealing its gambling ban.
FanDuel, a fantasy-sports betting site, was founded in 2009 in Texas, according to its website. Paddy Power shares rose 5.5% to 81.90 pounds at 9:45 a.m.
An acquisition of FanDuel “would improve the chances of Paddy Power Betfair establishing a foothold in the U.S. sports betting market,” Morgan Stanley analysts said in a note to clients.
Paddy Power Betfair issued its statement after the website Legal Sports Report published an article about the companies being in talks. Paddy Power Betfair is probably offering less than $1 billion, according to the site.
Axios reported in March that FanDuel was in talks to go public via a reverse merger with Platinum Eagle Acquisition Corp., a special-purpose acquisition company formed by media executive Jeff Sagansky. As part of a planned merger with DraftKings that was blocked by antitrust regulators, FanDuel in 2017 listed its equity valuation at $1.2 billion, Axios reported. Among the firms that have invested in FanDuel since its founding are KKR & Co., Alphabet Inc.’s Capital G fund, Time Warner Investments and NBC Sports Ventures.
Opportunities in a deregulated U.S. market will be more important for gambling companies if the U.K. clamps down, as expected, on the amounts customers can stake on highly profitable fixed-odds betting terminals, which have been linked to problem gambling and blamed for causing social harm. Analysts say William Hill would be worst hit by the change, and that the market has already started pricing in such an outcome.
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