Flutter and Fox announce phased closure of Fox Bet sportsbook
Flutter Entertainment and Fox Corporation have announced the decision to shut down the Fox Bet sportsbook. The companies said that a phased closure of Fox Bet's operations will take place between July 31 and August 31, 2023.
Flutter operated Fox Bet as part of The Stars Group US along with the US-facing operations of PokerStars. The company will retain ownership of PokerStars, in addition to US sports betting giant FanDuel, but will be saying goodbye to Fox Bet.
For its part, Fox will retain future use of the Fox and Fox Bet brands, including Fox Bet Super 6, and intends to launch “an all-new Fox Super 6 game later this summer.” It will also continue to hold its option to acquire 18.6% of FanDuel and, in addition, holds a 2.5% stake in Flutter.
Fox and Flutter's legal battle
Fox Bet was created in 2019 when Fox collaborated with The Stars Group to launch a branded sports betting service in the US. A year later, Flutter acquired the Stars Group, and in consequence, took over Fox Bet.
At the time of its development, it was decided that Fox Bet would be launched as two separate products. The first one would run as a nationwide free-to-play game, while the other would focus on states where sports betting was legal.
It was also decided that Fox Sports, a subsidiary of Fox, would acquire a minority holding of $236 million for a 4.99% stake in The Stars Group. Additionally, The Stars Group received an exclusive license to use certain Fox Sports trademarks for games and online sports wagering as part of a 25-year commercial agreement. The group also received exclusive advertising and editorial integration rights on select Fox Sports broadcast media and digital assets.
Fox Bet's debut in the US market took place in September 2019, with a launch in New Jersey. The product was subsequently expanded to Colorado, Michigan, and Pennsylvania, but its performance was not as successful as expected, and the Fox-Flutter partnership resulted to be anything but smooth.
In April 2021, Fox filed an arbitration suit against Flutter over a dispute relating to the purchase price of Fox's option to acquire an 18.6% stake in FanDuel. In December 2020, Flutter conditionally accepted to purchase a 37.2% stake in FanDuel from Fastball for $4.18 billion, taking Flutter's holding in FanDuel to 95%. The business said it intended to give Fox Sports the option to purchase 18.6% of the brand for fair market value in July 2021.
However, Fox in the lawsuit claimed that its agreement with Flutter was to purchase the stake for the price it would have cost in December of 2020. FanDuel at that price would be valued at $11.8 billion and the 18.6% share would cost $2.09 billion.
In November 2022, a New York arbitrator sided with Flutter and ruled that Fox could acquire the stake from a $22 billion valuation. The tribunal ruled that the price payable for the option was based on FanDuel's fair market value as of December 3, 2020, the date when Flutter announced the acquisition of Fastball's 37.2% stake in FanDuel.
However, the tribunal said that the fair market value of FanDuel as of December 2020 amounted to $20 billion, and not $11.2 billion. The decision was based on the valuation submissions of Flutter and Fox and other aspects including a comparison to its rival DraftKings.
The decision stated that “all parties understood that the purchase price of $4.18bn reflected a substantial discount” from the market value of FanDuel, due to certain terms in the agreement that incentivized Fastball to sell and so the higher figure was more appropriate.
From December 2020, Fox received a 10-year period to exercise the option to buy the stake. This is subject to annual compounding carrying value adjustment of 5%.
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