Flutter Entertainment plc is no stranger to mergers and acquisitions.
Formerly known as Paddy Power Betfair, the Dublin-based global gaming conglomerate has acquired several brands both before and after its own rebranding as Flutter in 2019, the same year it acquired The Stars Group (TSG).
Until now, those acquisitions have been mostly siloed, with little to no cross-product synergies across online poker, casino gaming, and sports betting. But, so far this year, Flutter has announced three major changes to its business strategy, each of which illustrates the company’s capacity to become a true iGaming powerhouse:
- Last month, Flutter announced a first-of-its-kind iGaming partnership, where its PokerStars brand would offer online poker and casino gaming in Ontario, while its FanDuel brand would offer sports betting.
- Flutter announced PokerStars Exchange, a part on the Betfair Exchange, allowing PokerStars players to bet and lay odds, and giving them access to the same global liquidity pool.
- Junglee Games, a recent Flutter acquisition, added a Spin and Go version of online rummy in India, incorporating parts of PokerStars’ poker product of the same name.
The changes are remarkable, but they also raise the question — what should it do with FOX Bet?
To date, FOX Bet Sportsbook is only live in four US states and has no presence anywhere else. It is among the smaller sportsbooks, in terms of market share and revenue, in each of the states in which it operates. It is also dwarfed by FanDuel.
Flutter has repeatedly declined to answer queries about what it plans to do long-term with FOX Bet, a brand TSG launched with Fox Corporation back in May 2019. Company executives also rarely mention the brand in its earnings calls and last week’s 30-minute Q1 2022 call was no exception. Flutter instead used the call to gush over FanDuel’s performance during the quarter.
So, what could happen with FOX Bet?
The History of FOX Bet
FOX Bet currently operates in four US states — Colorado, Michigan, New Jersey, and Pennsylvania.
The brand was launched in New Jersey and Pennsylvania within days of each other in September 2019. At the time, FOX Bet was heralded as a “first-of-its-kind national media and sports wagering partnership” between FOX Sports, a subsidiary of Fox Corporation, and TSG.
In New Jersey, FOX Bet replaced TSG’s BetStars-branded sportsbook. FOX Bet NJ is on the land-based casino license of Resorts Casino in Atlantic City. Other operators on the license include PokerStars NJ, DraftKings, and Mohegan Sun online casino. TSG retired its BetStars sportsbook brand in April 2020, replacing it with PokerStars Sports.
Meanwhile, in neighboring Pennsylvania, FOX Bet and PokerStars PA operate under the land-based casino license of the Mount Airy Casino Resort.
FOX Bet launched in Colorado in May 2020 through the land-based casino license of Lady Luck Casino Black Hawk. At the time, the facility was owned by Eldorado Resorts. Eldorado became Caesars Entertainment following a merger in July 2020.
Sports bettors in Michigan were introduced to the FOX Bet brand in January 2021, through a partnership with the Little Traverse Bay Band of Odawa Indians. The tribe owns and operates Odawa casinos in Mackinaw City and Petoskey.
Although all four of the land-based casinos have retail sportsbooks, none are through FOX Bet; the brand operates purely as an online sportsbook.
Possible Explanations for Status Quo
The iGaming partnership between PokerStars and FanDuel in Ontario shows the technology exists to make such a collaboration possible. It also could serve as a template elsewhere, but there could be reasons why this hasn’t been replicated in the US.
There could be internal politics at Flutter preventing such a move in the US. The company could wind up cutting its workforce if it ditched the FOX Bet brand in favor of FanDuel. Flutter may also be unwilling to part with the stable of sports personalities it has lined up for FOX Bet, including the NFL’s Terry Bradshaw, Howie Long, and Shannon Sharpe, MLB’s David Ortiz, and NASCAR’s Clint Bowyer, among others.
FOX Bet is also an official betting partner for several sports teams, playoffs, and events, including MLB’s World Series, the NHL’s Stanley Cup playoffs, NASCAR’s Daytona 500, and the US Open. It also has partnerships with 13 NFL teams, two NBA teams, and three NHL teams.
The lawsuit by Fox Corporation
Another potential snag involves Fox Corporation, which sued Flutter in April 2021.
The confidential lawsuit involves FOX’s option to purchase an 18.6% stake in FanDuel. Fox wants to acquire the stake for $11.2 billion, a valuation set in December 2020 when Flutter purchased a 37.2% stake in FanDuel from Fastball Holdings for $4.2 billion.
Under the agreement, Fox had the option of buying 18.6% of FanDuel in July 2021. But Flutter argues that Fox must pay “fair market value” to exercise its option to buy the stake.
Although Fox filed the lawsuit with Judicial Arbitration and Mediation Services (JAMS), both sides have continued to have discussions in hopes of reaching an agreement outside of arbitration. A hearing has been scheduled for June 20, should those negotiations fail.
“While those discussions have been productive and have advanced materially, it remains unclear at this time as to whether agreement can be concluded,” Flutter said in March when it announced preliminary results for 2021. The company said that if the dispute goes to arbitration, a decision is likely to be announced in Q3 2022.
“We recognize absolutely the value of the FanDuel assets, and therefore any deal that might be done with Fox will have to recognize that,” Flutter CFO Jonathan Hill said during a March 1 earnings call. “If we can’t get the deal that’s right for our shareholders, we’re very comfortable going to arbitration.”
CEO Peter Jackson concurred. “We’re very comfortable going to arbitration. We think that we’ve got a very robust position.”
When asked if Flutter was thinking about possibly consolidating some of its brands, Jackson said “In terms of what we’re doing in the US from a casino perspective, we know that there’s more for us to do. But fortunately, we know what we need to do.
“We’re very good at growing our direct casino businesses — and we intend to do that in the US. We have the best set of customers to cross that into.”