Lachlan Murdoch, currently engaged in a court dispute in Nevada over control of his father Rupert’s expansive media fortune, had an additional legal battle on his mind when he spoke at a Goldman Sachs conference recently. The CEO of Fox Corporation, a key component of the Murdoch empire, informed the attendees in San Francisco on September 10th that the organisation is gearing up to exercise its right to acquire an 18.6% stake in betting behemoth FanDuel, a rapidly expanding American gambling firm owned by Flutter Entertainment.
This development comes less than two years after an arbitrator in New York resolved a protracted legal disagreement regarding the cost Fox would have to meet to activate this option, a dispute between Flutter (the globe’s biggest gambling entity and owner of Paddy Power and BetFair) and Fox. Murdoch estimates that Fox stands to gain more than $2 billion (€1.8 billion) from this deal, since they’re expected to part with about $4.3 billion in accordance with the resolution, whilst the stake is worth approximately $6.5 billion on the free market, according to analyst valuations.
Fox is currently immersed in the complex process of obtaining a gaming operator licence, a prerequisite before exercising the option, Murdoch confirmed. Last week, Flutter consented to acquire a preliminary 56% stake in NSX Group, a Brazilian betting company, in an agreement that involves a $350m monetary transaction and merging its existing Brazilian operations into the expanded company.
Murdoch emphasised their intention to capitalise on this opportunity at the conference, stating, “We’re not going to leave $2 billion on the table”. Fox also possesses a direct 2.5 per cent stake in Flutter, worth in excess of $1 billion.
In the past few years, the valuations of American sports betting firms have skyrocketed, thanks to an increasing number of states enacting legislation to legalise the practice following a Supreme Court ruling in 2018 that permitted it. Since then, 38 states have made betting legal, 30 of which have legalised online gambling.
With FanDuel already securing a leading market position with 35 per cent stake in online betting, it has surpassed its close competitor, DraftKings, sitting on 32 per cent. Peter Jackson, the CEO of the parent company Flutter, secured a stake in FanDuel following a judgment. Flutter’s strategic relocation of its principle stock market listing to Wall Street manifested the potential held by the US market. The US business venture, which became profitable in the preceding year, forecasts an Ebitda ranging from $680 million to $800 million from a whopping $6.35 billion revenue. In contrast, Flutter’s earnings outside the US are anticipated at $1.69 billion to $1.85 billion from an estimated $8.15 billion revenue.
However, Jackson has not limited his quest for market dominance to the U.S alone. Recently, Flutter agreed to a 56 per cent initial stake purchase in Brazilian betting firm NSX Group. The agreement includes a $350 million cash transaction and integration of Flutter’s existing Brazilian operations into NSX. With Brazil’s impending online sports betting and iGaming market regulation due early next year, the unregulated market has observed an annual growth rate of 38 per cent over five years to reach $3 billion.
Moreover, the Italian betting market presents a significant potential. Italians only spent 21 per cent of a total €21 billion bet amount online last year. During the same week, Flutter confirmed the acquisition of Snaitech, Italy’s third-largest online betting company, from Playtech of the Isle of Man for a deal worth $2.6 billion. The integration of Snaitech with Flutter’s pre-existing Italian operations, majorly constituting Sisal gaming company acquired two years earlier for €1.9 billion, will escalate Flutter’s market share to 30 per cent. This acquisition capitalises on the unexploited potential within Italy’s betting industry, where online gambling only represents 21 per cent as compared to mature markets like UK and Australia where the percentage is above 60.
A significant challenge in taking Italians online is the prohibition of advertising for such an undertaking, which has been in place since 2018. According to Jackson’s statement during an analyst interaction earlier this year, Sisal has bypassed this rule by utilising its current local lottery permit.
He stated that they utilise a large-scale strategy, wherein lottery customers purchase their tickets at one of the 1,000 locations spread throughout the country. Customers can then scan the reverse of their tickets, accessing all the lottery functions, which enables the company to cross-sell into the gaming and sports sectors.
Given Italy’s imminent tendering process for its principal lottery permit, expanding its operations in the country is a viable approach. The permit has been held by International Game Technology (formerly Lottomatica Holdings) for the preceding thirty years, yet it is due to expire in November 2025.
According to recent reports on gambling news websites, there is speculation that Flutter is preparing Sisal to bid for this license. Flutter, however, refrained from commenting on the matter. The minimum bids have been set at €1 billion.
Regardless, other potential contenders might be apprehensive that Flutter—with its method of attracting lottery customers to its advantageous online services—may have justified cause to bid considerably above what might seem financially feasible when considering only the returns from the license.