with fantasy sports league company come as UK bookmakers are well placed for
slice of US market
Paddy Power Betfair
has made the first move in an expected wave of takeover activity prompted by
the legalisation of sports betting in the US, as it launched a bid for fantasy
sports league company FanDuel.
Shares in UK gambling companies soared
earlier this week as investors responded to the US supreme courts
decision to overturn a law known as PASPA, a ban on sports bets that had stood
for 26 years.
Many analysts believe London-listed firms are well placed
to grab a slice of the US market, where some estimates say nearly $150bn
(£111bn) in illegal wagers are placed every year.
While US states
will have to draw up their own gambling laws, a process that could take years
in some cases, the shift in the US landscape is expected to encourage British
firms to seek takeovers or become targets themselves.
confirmed it was already in talks with FanDuel to create a combined
business to target the prospective US sports betting market.
FanDuel is a web-based fantasy sports game with 6 million registered
users, who can put together virtual teams in sports such as American football
and win cash prizes based on their success against other players.
websites have slipped through the net of the US ban on sports betting because
they are seen as games of skill rather than of chance but an alliance would
help Paddy Power push betting products through the site.
If a deal goes
ahead, it is likely to be worth considerably more than the $48m (£35.6m)
that Paddy Power paid for FanDuels smaller rival Draft last year.
FanDuel, which was blocked from merging with its main competitor
DraftKings by the US competition regulators last year, has been valued at $1bn
by some analysts.
Paddy Power Betfairs shares jumped by more than
12.2% in a day when the supreme court announced its decision earlier this week,
signalling analysts belief that it is well placed to launch an assault on
the US market.
They closed up a further 6% on Wednesday at £82.15
as markets digested the potential for the company to add FanDuel to its
existing US operation.
As well as its fantasy sports presence via
Draft, Paddy Power Betfair owns horseracing TV channel TVG and an online casino
in New Jersey, the state that challenged the ban on sports betting and has made
the most progress putting preparations in place for the industry to grow.
However, while Paddy Power hopes to be the buyer in this case, analysts
at the stockbroker Goodbody said European betting firms could find that they
are tempting targets for US companies looking to purchase expertise.
Given the regulatory and taxation headwinds that European
operators are facing in their home markets over the next few years, [the repeal
of PASPA] is a very attractive long-term positive for the companies under our
coverage and as such is supportive of their long-term growth prospects,
It also could see European operators speculated as
potential M&A targets, given the unique sports betting skill set they
possess, said the analyst Gavin Kelleher.
Shares in the online
casino 888 and the high street bookmaker William Hill jumped by 15% and 11%
respectively on the repeal of PASPA. Both have a US presence and have
previously explored options for consolidation before ultimately rejecting them.
William Hill and Canadas Amaya called off a £4.6bn merger
in 2016, while the British bookmaker turned down a tentative approach for a
three-way merger with 888 and the Mecca Bingo owner, Rank.