Flutter Entertainment surges as it ups stake in FanDuel

Flutter Entertainment shares surged after the Paddy Power Betfair owner said it had agreed to buy the entire 37.2% interest in US gaming company FanDuel currently held by Fastball Holdings - a consortium led by private equity group KKR - for $4.18bn (£3.13bn).

Flutter bought a controlling stake in FanDuel in 2018. It said on Thursday that the deal, which is conditional on shareholder approval, will take its stake in FanDuel to 95% from 57.8%. The remaining 5% will continue to be held by existing co-shareholder Boyd Interactive Gaming.

It will "materially" increase Flutter’s exposure to the US market, which it said is "the most attractive sector opportunity today".

In addition, the company said it was taking the opportunity to secure the further stake in FanDuel at a discount to the intrinsic fair value, as well as a discount to its closest peer. The transaction also removes "considerable uncertainty" with respect to buyout obligations of Fastball's stake and simplifies stakeholder arrangements, increasing Flutter's flexibility to optimise US structure over time, it said.

Chief executive officer Peter Jackson said the Flutters’ initial acquisition of a controlling stake in FanDuel had been "transformational for the shape of the group".

"Our number one position in the crucial US market is built on many of the assets we acquired through that transaction, supported by the broader group’s capabilities. Our intention has always been to increase our stake in the business and I'm delighted to be able to do so earlier than originally planned and at a discount to its closest peer."

The consideration for the deal is expected to be satisfied through a combination of $2.09bn in cash and the issue of around 11.7m new Flutter ordinary shares directly to Fastball.

The cash element will be funded through cash on the balance sheet and an equity placing to raise around £1.1bn through a non-pre-emptive placing of new ordinary shares of €0.09 each to institutional investors.

At 1245 GMT, the shares were up 8.4% at 14,490p.