FTSE 100 listed sports betting platform, Flutter Entertainment (LON:FLTR), watched its shares add 13% on Thursday, as it announced that it had entered into a conditional agreement to acquire a 37.2% interest in New York-based gambling company, FanDuel.
The deal would see Flutter Entertainment take over the stake currently held by Fastball for a consideration of US$4.175 billion (£3.131 billion). The company added that the transaction is conditional on the approval of Flutter shareholder approval, and that a general meeting is expected to occur before the end of the calendar year.
Should the acquisition be completed, Flutter’s stake in FanDuel will increase from 57.8% to 95%. The company continued, saying that the deal would increase its exposure to the highly ‘attractive’ US market, with the price of the transaction representing a discount on FanDuel’s intrinsic fair value.
Flutter Entertainment added that it plans to finance the acquisition through $2.088billion in cash and approximately 11.7 million new ordinary shares directly to Fastball. The cash will be raised via a £1.1 billion equity placing and cash already on the company’s balance sheet. It also said that post-transaction, it expects year-end leverage to be under 3.0X EBITDA, while it retains its medium-term target of 1.0X to 2.0X.
Commenting on the deal, Peter Jackson, Flutter Chief Executive, said: “Flutter’s initial acquisition of a controlling stake in FanDuel in 2018 has 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.”
“I would like to take this opportunity to thank our partners in Fastball for their tremendous support over the last 2½ years and for their ongoing commitment to Flutter as soon-to-be shareholders in the wider Group. We look forward to continuing to grow our US business, alongside our key media partner FOX, as further states move to regulate sports betting and gaming.”
Following the update, Flutter Entertainment shares rallied by 13.24%, up to 15,135.00p 03/12/20 13:00 GMT. This price is an all-time-high, and around 38% of analysts’ consensus target price of 9,345.45p a share.
The stock has a consensus Hold rating from analysts, and a 75.00% ‘Underperform’ stance from the Marketbeat community. The company has a pricey p/e ratio of 14586, and a dividend yield of 2.67%.