An arbitration result has ruled in Flutter’s favor and valued its subsidiary FanDuel at $20bn. A key taking from the ruling was the exercise price of Fox Corporation’s option to acquire 18.6% of FanDuel Group would be based on this $20bn valuation.
The arbitrator said the valuation is based on fair market value – made in December 2021 – when Flutter acquired a 37.2% stake from Fastballs Holdings for an implied $11.2bn estimate of FanDuel.
The exercise price presented by the arbitration was subject to 5% annual compounding, carrying value adjustment, up to the date of any exercise made by Fox prior to December 2030. As of today, this equates to a $22bn estimate value of FanDuel and a $4.1bn cost for Fox to acquire an 18.6% stake.
Fox started this arbitration dispute with Flutter on April 7, when Fox argued that FanDuel’s fair market share value contrasted sharply with the $11.2bn the sports betting company was previously valued at.
The arbitration tribunal stated that it arrived at the $20bn valuation having used a “full range of valuation methodologies,” including discounted cash flow.
Fox has a 10-year period to exercise its option to buy (which began on December 2020) and the deal will continue to be subject to 5% annual compound interest. This means the longer Fox holds off acquiring the 18.6% stake, the more it will cost the company.
Cash payment is required at the time of payment and the option may only be exercised in full. As of November 4, the option price is $4.1bn, which is made of the $3.7bn exercise price for 18.6% of FanDuel combined with the 5% annual carrying value adjustment.
