iGaming Business magazine iGB 111 July/Aug | Page 42

Sports Betting
PPB ’s reputation rises
WITH A
SAVVY ACQUISITION
The news that Paddy Power Betfair is buying a majority stake in FanDuel has gone a long way
to silencing its critics, says Scott Longley
Scott Longley has been a journalist since the
early noughties covering personal finance, sport
and gambling. He has worked for a number
of publications including Investment Week,
Bloomberg Money, Football First, eGaming Review
and Gambling Compliance. He now runs his
own editorial consultancy, Clear Concise Media,
and writes for a number of online and print titles.
Some were beginning to question the point of Paddy Power Betfair,
until news broke that the company had gotten a headstart in the
race to establish a sizeable US footprint by buying up a majority
stake in FanDuel.
It may seem unnecessarily doom-laden given the SCOTUS
decision to nix PASPA but those were the worries at the time of its
first quarter trading update, when the company announced that
it was embarking on a £500m share buyback.
The news seemed to crystallise fears being expressed about
the net effect of the spate of mega-mergers. What if size wasn’t
everything? Paddy Power Betfair’s buyback seemed to indicate that,
for all its hard-won enormity, the company was somehow lacking
a creative spark.
To some there is no surer sign a large company has lost its way
than a share-buyback programme. It can be sold as a positive for
shareholders, as some opt to get cash for their shares while those
left see the benefit of fewer shares on the market and will have a
larger stake in future dividends.
Yet the argument that shareholders know best what to do with
the spare cash being generated by a company – Paddy Power Betfair
had $440m in cash on the balance sheet as of the end of March –
is, for all the blandishments, something of an admittance of defeat.
In the words of iGBNA contributor Paul Leyland, the company
appeared to have lost its ‘mojo’. Accusing the company and new-ish
chief executive Peter Jackson – who took over from Breon Corcoran
in January – of playing too defensively, he suggested then that
“handing the strategic keys back to shareholders” via the buyback
was “playing it safe”. He added that a company of such “power and
scale should be making more mischief than this”.
40

iGamingBusiness | Issue 111 | July/August 2018
I’m Breon and so’s my wife
Yet Jackson would have known better at the time. Although it is very
early days when it comes to the nascent regulated US sports-betting
market, Paddy Power Betfair has by virtue of this move immediately
established itself as far and away the largest company active in the
market, with pro forma US revenues (including its existing TVG and
Draft businesses) of $265m.
More to the point, Paddy Power Betfair now has access to
FanDuel’s 1.3 million actives (as of 2017), who play daily fantasy
sports (DFS) legally in 40 states. For those who believed that fantasy
was dead and buried – including perhaps even the private equity
owners of FanDuel, who managed to elbow out founders Nigel and
Lesley Eccles last year and now retain at least a 20% stake for the
next five years – it is a welcome second coming.
Whichever way you look at it, the PASPA decision revives
daily fantasy and the fortunes of FanDuel itself and its major
rival DraftKings, which similarly rode the wave of post-decision
enthusiasm with the announcement of its own plans to enter into the
sports-betting markets.
DFS may be seen by many – particularly the European-based
sports-betting industry – as only a gateway to the real thing. But for
the time being it is, as they say, the only game in town in many states;
it will take time for the politicians and various stakeholders to get
their sports-betting legislative ducks in a row.
The FanDuel deal is an early play for US dominance but it also
marks another stage of development in the super-heated European
gaming M&A furnace. The speed of the deal announcement and
the strategic sense of it all will perhaps have had the effect of slightly
bruising the egos of those helming the other big beasts in the sector.
Hence, perhaps, the almost Trumpian claims of the current M&A
king Kenny Alexander, who used GVC’s recent trading statement
to suggest that the company had been holding “many, many” talks
about US partnerships, adding that “whatever we announce, it’s
going to be big, it’s going to be bold, it’s going to be aggressive”.
Given the excitement within the sector generated by the Supreme
Court’s opinion on PASPA, the likelihood is that more big and bold
announcements will be made even before a post-PASPA bet is struck
in New Jersey or anywhere else.