This summer, Fox Corporation and Flutter Entertainment will go to court over the price of the former’s option to purchase a 18.6 percentage interest in the FanDuel Group. The Murdoch-owned media firm says that the option should be priced the same as Flutter’s December contract with Fastball Holdings.
In the $14.18 billion December sale, Flutter, which combined its US business with FanDuel in 2018, increased its FanDuel stake to 95 percent. After assisting in the transaction’s completion, Fox was granted the option to purchase 18.6 percent of FanDuel in July of this year.
Reasonable market value
With the buyout opportunity looming, Flutter has demanded that Fox pay a reasonable market value for the FanDuel firm, as opposed to the price negotiated with Fastball Holdings in December, which it claims was set at a discount to the true value of the company.
Flutter has also set a standard for the pricing of Fox’s option, with Chief Executive Peter Jackson announcing during the company’s quarterly conference call last month that the price will vary from the Fireball valuation.
Fox Corp and Flutter Entertainment statements
The Fox Corporation released the following statement in reaction to the growing public attention in the dispute: “Fox Corporation has filed suit against Flutter to enforce its rights to acquire an 18.6 percent ownership interest in FanDuel Group—an American sports betting brand—for the same price that Flutter paid for that interest in December 2020. The suit was filed as an arbitration before JAMS in New York, NY by consent of the parties.”
Flutter retaliated by releasing a statement of its own, stating: “Flutter notes the statement made by Fox Corporation with respect to a legal dispute between the two parties in relation to an option to acquire an 18.6 percent stake in FanDuel.
“Under the terms of Flutter’s agreement with Fox Corporation, an arbitration mechanism was put in place at the time of The Stars Group merger announcement to be conducted in the event of a disagreement between the two parties relating to the option. That now being the case, such a process has been initiated by Fox.”
Flutter went on to say about its objections to Fox’s strategy: “FOX’s position that it has a right to acquire an 18.6 percent interest in FanDuel based on an $11.2bn valuation is incorrect. It would represent a windfall to Fox compared to the fair market valuation as of July 2021, to which the parties had previously agreed. Flutter will not allow Fox’s filing, which is without merit, to distract from its business and will vigorously defend its position in the arbitration.”
The Fox lawsuit had an immediate impact on Flutter’s stock price, which plummeted 2 percent in early trading, which comes at a time when investor hopes for the US gaming industry are at an all-time high. For example, DraftKings, which went public last April after a SPAC acquisition, has seen its stock triple in valuation.