As expected, Paddy Power Betfair has made the first big acquisition of the new legal sports betting era.
Paddy Power Betfair bought daily fantasy sports operator FanDuel by combining its existing U.S. operations with Fan Duel into an entity 61 percent owned by Paddy Power Betfair, and for $158 million in cash, with which Fan Duel will pay off net debt of $76 million. Over time, Paddy Power Betfair will be able to buy the remainder of the new entity.
This is a nice move by Paddy Power Betfair.
FanDuel provides 7 million registered and 1.3 million active users, a young, sports betting-oriented audience. FanDuel contributes revenues that totaled $124 million last year, 40 percent of the US daily fantasy sports market.
The combined operations of the new entity generated $265 million in revenues in the past year, including $141 million from Betfair US, which operates online in New Jersey and owns TVG account wagering service.
The acquisition makes Paddy Power Betfair the largest online operator in the U.S., the company pointed out noting that Churchill Downs’ Twin Spires account wagering service took in $132 million and William Hill’s $42 million.
The $265 million is a small part today of Paddy Power Betfair’s $2 billion-plus annual revenue, but no doubt, the company is positioned to grow all three of the new entity’s business segments – online gambling, daily fantasy sports and sports and race wagering.
One immediate reaction was for the general business press to cry, almost in unison like a Greek chorus, “Oh, no. The sky is falling for U.S. regional casino companies.”
Not quite.
Regional operators like Penn National, Boyd and Eldorado will continue to benefit as states in which they own casinos legalize sports betting.
States will still likely limit sports betting to already licensed casinos, and if internet gaming is legalized, require online operators to go through the casinos to operate, as in New Jersey.
Large companies that can provide sports books or risk management services to small casinos or to state lotteries will still have that opportunity. So, count William Hill, Caesars and MGM Resorts as still in.
And the other players are still there. Churchill Downs can exploit its Twin Spires database. GAN can convert its free-play Simulated Gaming casino clients into real-money sites at the turn of a key. Scientific Games and IGT will still have their systems and their years of experience.
From our view, the competitive landscape looks about the same, though Paddy Power Betfair has certainly made itself a bigger player with a big opportunity, and it does beg the question of what larger fantasy sports competitor DraftKing will do.
Well Deserved Honor
As mentioned in previous columns, I am partial to companies in which the founder, or the founder’s family, remains in control.
Such companies often combine the founder’s vision and a sense of pride in ownership and in family that translates into excellent management for minority shareholders who don’t have to worry about the CEO’s priorities.
One such company is Monarch Casino, which the Farahi family founded and in which John Farahi has served as CEO for many years. John Farahi has always represented the personal and business qualities one wants in a leader, and to whom one entrusts his own financial resources.
Thus, it was a delight to read that the University Nevada at Reno has awarded an Honorary Doctorate of Humane Letters to John for what Monarch said was commitment “to two principles: steadfastness in protecting the community’s interests while fighting against special interest groups, and bringing Nevadans a better understanding of Middle Eastern history and culture.”
Well deserved, Dr. Farahi.
