“This combination creates the industry’s largest online business in the U.S., with a large sports-focused customer base and an extensive nationwide footprint,” Paddy Power Betfair Chief Executive Peter Jackson said.
It is the first deal since the U.S. Supreme Court struck down a federal law that had prohibited gambling across much of the U.S., opening the way for states to legalize commercial sports betting.
Paddy Power Betfair will contribute $158 million in cash and U.S. assets worth $612 million in exchange for a 61% stake in the combined business, Reuters reported. Part of the cash contribution will be used to pay down FanDuel’s $76 million in debt.
Under the deal, Paddy Power can increase its ownership to 80% after three years and 100% after five years.
The merger is expected to close in the third quarter.
FanDuel has more than 40% of the daily-format U.S. fantasy sports market. The company lost $37 million last year on revenue of $124 million, Paddy Power said in a presentation. Last year, FanDuel was involved in a proposed merger with DraftKings, but regulators scotched the deal.
“FanDuel and Betfair US share an enthusiasm for innovation and, as a result of today’s announcement, are prepared to lead the charge into the U.S. sports betting market,” FanDuel Chief Executive Matt King said.
“The combination of our brands and team, along with a shared culture and vision for the future, will allow us to create the leading gaming destination for sports fans everywhere.”
“Together with our substantial financial firepower, we believe we are now exceptionally well placed to target the prospective U.S. sport betting opportunity,” Paddy Power Betfair’s Jackson said.