Fox Corp. (NASDAQ: FOX) is reportedly on the verge of acquiring an 18.6% stake in Flutter Entertainment’s (NYSE:FLUT) FanDuel, potentially at a substantial discount compared to the sportsbook operator’s current market value. Speaking at the Goldman Sachs Communacopia and Technology Conference, Fox CEO Lachlan Murdoch confirmed that the media conglomerate is moving forward with its plans to secure this significant interest in FanDuel. This opportunity stems from rights Fox acquired in 2020 when Flutter purchased The Stars Group (TSG) for $12.2 billion. Fox had previously sold Sky Bet to TSG in 2018 for $4.7 billion, obtaining an equity stake in return.
Murdoch told the conference attendees that Fox estimates FanDuel’s value at $35 billion, which would make the 18.6% stake worth around $6.5 billion. If accurate, this valuation positions FanDuel significantly ahead of its closest competitor, DraftKings (NASDAQ:DKNG), which ended Wednesday’s trading with a market capitalization of $17.78 billion.
This $6.5 billion valuation is notably higher than Fox’s earlier estimate of $4.3 billion needed to exercise its acquisition rights. To proceed, Fox must secure licensing as a sportsbook operator in the states where FanDuel is active. Murdoch emphasized that the company is actively working on obtaining these necessary state gaming permits.
“We’re not going to leave $2 billion on the table,” Murdoch asserted.
The increasing value of FanDuel is evident. After a legal dispute in 2022 between Flutter and Fox, the latter agreed to acquire its 18.6% stake for $3.72 billion with a 5% annual escalator. This arrangement means that the acquisition cost inflates by 5% each year if the option is not exercised.
“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,” noted a November 2022 statement from Fox. “FOX has no obligation to commit capital towards this opportunity unless and until it exercises the option.”
Murdoch mentioned that Fox has begun the process of obtaining state gaming permits necessary for this transaction. “We’ve begun the process with state regulators,” he said. “To fully monetize the option, we need to be licensed as a gaming operator, even with only 18.6%, and so we’ve started that process with state regulators to begin the gaming licensing approvals.”
Regarding the funding for this acquisition, Murdoch did not provide specific details on how Fox plans to secure the required $4.3 billion. However, it is notable that, as of the end of fiscal 2024, Fox had $4.31 billion in cash and cash equivalents. During the Goldman conference, Murdoch indicated that Fox might explore mergers and acquisitions to strengthen its news and sports divisions, which would also require substantial capital. He did not discuss the possibility of taking on debt to finance such acquisitions or the FanDuel stake purchase.
