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Flutter Entertainment PLC on Monday said it has won an arbitration ruling related to media company Fox Corp's option to acquire just shy of a 19% stake in US arm FanDuel Group.
Meanwhile, Fox called the outcome "fair and favourable", noting that Flutter cannot pursue an initial public offering for FanDuel without Fox's consent.
The duo argued over the consideration for the stake, with Fox believing it should only acquire the holding at the same price Flutter paid back in December 2020. Flutter and Fox said that the arbitration confirmed that Fox has until December 2030 to exercise the option to buy into FanDuel.
Fox on Friday said: "Fox is pleased with the fair and favorable outcome of the Flutter arbitration. Flutter cannot pursue an IPO for FanDuel without Fox's consent or approval from the arbitrator. Fox has a 10-year call option that expires in December 2030 to acquire 18.6% of FanDuel for $3.72 billion, with a 5% annual escalator. Fox has no obligation to commit capital towards this opportunity unless and until it exercises the option. This optionality over a meaningful equity stake in the market leading US online sports betting operation confirms the tremendous value Fox has created as a first mover media partner in the US. sports betting landscape."
However, Paddy Power-owner Flutter on Monday said an arbitration confirmed the fee that Fox would pay for the stake would be based on a FanDuel valuation of $20 billion.
With annual compounding, this equates to a valuation for FanDuel of $22 billion and a cost of $4.1 billion for Fox to acquire an 18.6% stake, Flutter said.
In April 2021, Fox filed an arbitration suit against Flutter to enforce its right to buy an 18.6% stake in FanDuel, at the same price Flutter paid roughly five months earlier. But Flutter said Fox's position was "incorrect" and that both companies agreed to a fair market valuation as of July 2021.
It would be a "windfall to Fox" if Flutter sold the FanDuel stake at an $11.2 billion valuation, Flutter said in April of last year. The dispute goes back to Flutter's merger with US gambling company Stars Group Inc in 2019.
The deal gave Fox Sports, the media partner of Stars Group, an option to buy a stake in FanDuel.
Flutter Chief Executive Peter Jackson said on Monday: "Today's ruling vindicates the confidence we had in our position on this matter and provides certainty on what it would cost FOX to buy into this business, should they wish to do so."
Flutter expects a binding decision from the arbitrator in early 2023.
Flutter Entertainment shares rose 4.8% to 12,065.00 pence each on Monday morning in London.
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