Flutter wins FanDuel NY court case

Flutter’s FanDuel court victory, Acroud’s ‘mystery buy’ revealed, the shares week – DraftKings’ dive, Startup Focus – Fortuna Edge Media +More

Earnings+More

Oct 17, 2022

On the agenda today:

FanDuel’s original shareholders lose their New York court battle.
Catena Media’s ad-buying division is Acroud’s ‘mystery buy’.
Our Startup Focus this week is Fortuna Edge Media.
DraftKings’ shares take a 24% dive in the week after ESPN rumors.
And a phrase E+M most loves to hate makes an appearance at G2E.

This wheel’s on fire.

Flutter’s FanDuel court win

The attempt by a group led by Nigel Eccles to persuade a Manhattan court they had been cheated out of the proceeds from the buyout in 2018 has failed.

Here comes the judge: The state appeal court found that the group of former FanDuel shareholders had failed to make a valid legal claim under Scottish law, where FanDuel is incorporated. The five-judge panel of the court said that under Scottish law directors’ duties are to the company but not to shareholders.

Eccles and others claimed that private equity firms Shamrock Capital Advisors and KKR had artificially depressed the price of FanDuel to stop the shareholders benefitting when it was sold to Paddy Power Betfair, as Flutter was named at the time.
The buyout was a complex deal involving Paddy Power Betfair folding its US business into a merged entity with the heavily indebted FanDuel and injecting $158m of cash.
For that PPB gained a 60% share of FanDuel, which it has subsequently upped to 95%.
The deal was announced a matter of days after the US Supreme Court PASPA judgment in May 2018.
Eccles has subsequently launched a decentralized betting exchange called BetDEX.
“This is a sweeping victory for our client, which confirms that the transaction was fundamentally fair and the proceeds were appropriately distributed,” said Mark Kirsch from King & Spalding who represented FanDuel.

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Acroud’s ‘mystery buy’ revealed

The acquisition announced by Acroud last week is part of Catena Media’s paid media division.

Pop up and under: Acroud’s €5.1m acquisition announced last week can be revealed to be part of Catena Media’s paid media/ad-buying division. The company mentioned in the Acroud press release last week was Acroud Media Ltd.

A check on Companies House shows that the company was formed in June by Gary Gillies, who previously sold the SBAT business to Catena in October 2016 for €3.2m.
Heading up Acroud Media Ltd is Darren Colebrook who, according to LinkedIn, switched this month having previously been the general manager for growth at Catena.
Acroud said last week it had bought a 60% stake in this business for €1m of shares and €4.1m of cash, with an option to buy the remaining 40% in 2028 based on subsequent performance metrics.
Sources suggested this business is at least part of Catena Media’s ad-buying unit.

Recall, in May Catena Media said it was considering a break-up of its European business after receiving approaches for its AskGamblers brand. It subsequently said it was undertaking a strategic review of the entire European business.

When contacted, Catena Media said its strategic review was ”continuing” and it would announce an outcome “once completed”. At press time, Acroud had not responded to E+M enquiries.

Analyst takes from G2E

Vegas bulls: Jefferies said trends and forward-looking data remained bullish, with Las Vegas seeing “accelerating volumes” approximating 2019 levels and bookings for 2023 indicating upside. Jefferies said all the executives conveyed a sense of urgency around “participating in digital gaming, whether OSB and/or iGaming”.

California bears: The team at JMP said it was clear the “writing was on the wall” for both the ballot measures in California and they have removed the states from their 2023 estimates. But iCasino measures in other states have been gaining momentum, with varying degrees of optimism around Indiana, Illinois, Iowa, New York and even Nevada.

Earnings in brief

Française des Jeux saw Q3 revenue rise 12% to €592m. Lottery games were up 14% to €478m, sports-betting stakes were down 7.5% to €2.9bn, with revenue flat at €97m due to tough YoY comps. The group said online stakes were up 35%.

Startup Focus - Fortuna Edge Media

Who, what, where and when: Fortuna Edge Media was co-founded by CEO Aidan Toolan in 2019 and operates the BettingAmerica.com website. The management team consists of former Paddy Power, Facebook and HubSpot employees. Its focus is on developing “sustainable user acquisition solutions that create value at scale” in the US sports-betting and iCasino market.

Funding backgrounder: Toolan says the company is fully bootstrapped and has been profitable from its earliest days. This has given it “huge momentum and allowed us to grow fast and be agile in how we have evolved as a company”.

The pitch: Toolan says FEM’s acquisition tech infrastructure will leverage data to drive “hyper-personalized” player interactions that allow for scale, speed and efficiency. He adds that his company’s focus is sustainable acquisition and value generation.

The fact that operators tend to stick to costly media channels presents it with a great opportunity “to wade in” and develop “highly efficient alternative acquisition channels” through its tech stack.
“For US operators currently, efficient and scalable user acquisition is their number one challenge. However, what we see is that for most their current business model is not sustainable.”
“We feel this is because one of their biggest problems is having the ability to line up their tech stack in a way that enables them to quickly make strategic decisions in real-time.”
“But in many cases, the tech is inefficient, disconnected, cumbersome and slow. This has huge ramifications because it has a knock-on effect in relation to how efficiently operators can drive sustainable user acquisition and this has a massive impact on their revenues.”

What will success look like? Further growth and expansion is the near-term goal, but Toolan adds that the high levels of interest from both operators and affiliates in terms of what the company is achieving has led it to engage with advisory firm Akur Partners.

“While we are fully committed to what we are currently doing, if the right opportunity comes along with the right partner that could help us expedite our growth, that’s a conversation we are very open to having,” he added.

Buzzword watch

It’s back, back, back: Yes, the flywheel. To the relief of absolutely no one, Amy Howe, CEO at FanDuel, gave the word a spin during the keynote conversation on day 2. “It’s a flywheel business where scale really matters,” she informed the audience.

The shares week

Bruising: Despite Jason Robins’ upbeat appearance on the same panel last week being quizzed (gently) by CNBC’s Contessa Brewer, it seems investors were none too impressed with the prospects of DraftKings marketing tie-up with ESPN. Shares were down nearly 24% last week.

Jefferies suggested the pullback may be California related (see above), though they noted that not having to splash out on a California launch is better for DraftKings’ 2023 profitability prospects.
The company has also set the date for its Q3 results as Nov 4.

The week ahead

E+M’s Deal Talk returns tomorrow and takes an in-depth look at potential US exit strategies for a number of OSB operators. On Wednesday, Entain hosts its Sustain conference and Las Vegas Sands publishes its Q3 results. The E+M podcast returns on Thursday and the Weekend Edition wraps up the week.

Newslines

Loto-Québec is exploring the possibility of adding retail sports betting at its four casinos and two gaming halls, according to Covers.

Novomatic’s Greentube has acquired US games developer Present Creative for an undisclosed amount to expand its presence in North America.

Scout Gaming will deliver its DFS and sports-betting products to the Australian operator Apple iSports.

Former Betway executives Tim Whyles and Adam Savinson’s esports-focused media company Zealium Media has acquired the Valorant news and stats website Thespike.gg.

Brazilian games studio Caleta Gaming has launched Imperial: Operation Rio, a CS:GO-inspired online slot in partnership with Sportsbet.io, Gamdom and esports organization Imperial.

Seven Star Digital has acquired sports-betting content provider Moneta Communications for an undisclosed sum.

What we’re reading

Succession planning: Murdoch considers merging Fox and News Corp, in order to “explore ways to use the company’s assets for emerging business lines, such as sports betting”.

On the brink: iGB says Esports Entertainment is now at the mercy of creditors.