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Sports betting company Flutter is considering outsourcing FanDuel to add value

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The DraftKings app and the FanDuel website

Andrew Harrer | Bloomberg | Getty Images

Flutter, the UK-based mobile games company that owns 95% of FanDuel, is considering outsourcing FanDuel as a separately traded company to trade on a US exchange.

A separation from FanDuel is not certain or is imminent, said the people who asked not to be named because the discussions are private. FanDuel is Flatter’s crown jewel, which could spur Flutter CEO Peter Jackson to keep it.

Fox Sports, which owns 2.5% of Flutter, has the option to purchase an additional 18.5% stake in FanDuel in July. Fox also has a 10-year option to buy half of Stars Group’s US business, another Flutter asset. (Stars Group owns Fox Bet.) Solving Fox’s FanDuel ownership is a complicated factor that can delay a spin-off, people said.

FanDuel and Fox Sports spokespersons declined to comment.

Several investors in Flutter expressed frustration that Flutter is trading at a discount on DraftKings despite FanDuel’s status as the largest US player, said people who asked not to be named because the discussions are private. When Flutter announced it would acquire an additional 37.2% stake in FanDuel for $ 4.5 billion in December, part of the logic behind the transaction was to facilitate an eventual spin-off of FanDuel.

DraftKings’ market cap is more than $ 28 billion. The company had sales of $ 644 million in 2020 and forecasts sales of $ 900 to $ 1 billion in 2021.

Flutter, which trades on the London Stock Exchange, has a market capitalization of £ 27.7 billion (about $ 39 billion), which is less than 40% more, despite FanDuel’s sales of $ 967 million in 2020 alone scored which is 50% more – and that doesn’t include Flutter’s other assets. In addition, FanDuel claims to be the leader in US gaming with a 40% market share.

A potential spin-off could come at a crucial time for mobile sports betting in the US, as 19 states will vote on whether to legalize them this year, including Texas and New York, the second and third largest states.

Flutter is a holding company for betting companies such as Paddy Power, Betfair, Fox Bet, PokerStars and TVG. The other assets with lower growth profiles can weigh on FanDuel’s value. FastBall Holdings, a consortium of venture capital firms CapitalG (the late-stage investment arm of Google parent company Alphabet), Comcast Ventures, KKR, Verizon Ventures, NBC Sports Group and Shamrock Capital, owns 7% of Flutter after acquiring FanDuel in December.

Disclosures: Comcast Ventures is the venture capital arm of Comcast, owned by NBCUniversal, the parent company of NBC Sports Group and CNBC.

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Katherine Clark