Paddy Power to merge US business with fantasy sports operator FanDuel

The company said the deal strengthens its opportunity to target the prospective US sports betting market through the addition of "a strong brand, large existing customer base and talented team". In addition, the scale of the combined business means it is well positioned in discussions with providers of market access for sports betting.

Headquartered in New York, FanDuel has over 40% market share of the US daily fantasy sports market, with 7m registered customers across 40 states. In 2017, it generated revenue of $124m and had 1.3m active customers.

Under the agreement, the group will contribute its existing US assets along with $158m of cash, which will be used to pay down existing FanDuel debt and fund the working capital of the combined business.

Upon completion of the deal, the group will own 61% of the combined business, with existing FanDuel investors owning 39%. There is also an option to buy out FanDuel after five years.

Paddy Power chief executive Peter Jackson said: "We are excited to add FanDuel to the group's portfolio of leading sports brands. This combination creates the industry's largest online business in the US, with a large sports-focused customer base and an extensive nationwide footprint.

"The group has leading sports betting operating capabilities globally and strong operations on the ground in the US. Together with our substantial financial firepower, we believe we are now well placed to target the prospective US sports betting opportunity."

FanDuel CEO Matt King said: "We are excited to bring these two great businesses together. The combination of brands and team, along with a shared culture and vision for the future, creates the leading gaming destination for US sports fans."

Whitman Howard analyst Michael Campbell said: "While the structure of deal appears to de-risk PPB’s entry into US sports betting and the merger provides an opportunity to target a significant ready-made active customer base, the timing of sports betting regulation/legislation is at the discretion of each State, and may take some time to implement.

"Secondly, due to the lack of sports betting in the US, it is likely it may result in cannibalisation of the DFS market, worth circa $300m in revenue with around 3m actives ($100/active/year). It is not clear how many of 1.3m actives originate from the 19 States where DFS is legal, which could leave the door open for possible future litigation/fines from States."

At 0907 BST, the shares were up 2.3% to 8,825p.