May 16, 2018 / 6:37 AM / 7 days ago

Paddy Power Betfair in discussions to buy FanDuel

DUBLIN (Reuters) - Paddy Power Betfair (PPB.I) (PPB.L) is considering merging its U.S. business with fantasy sports company FanDuel to target the U.S. sports betting market, the Irish bookmaker said on Wednesday.

A U.S. Supreme Court ruling on Monday paved the way for states to legalize sports gambling after it struck down a 1992 federal law that had barred gambling in most places.

The Dublin-based company said talks with FanDuel are ongoing and there was no certainty as to whether an agreement would be reached.

Paddy Power shares, which rose sharply after the U.S. Supreme Court ruling, were up 5.4 percent at 0815 GMT.

Firms like Paddy Power Betfair are looking for growth opportunities to offset the increasing cost of regulation in established markets such as Britain and Australia.

Paddy Power Betfair runs the leading U.S. horse racing television and betting network and has an online casino business in New Jersey which contributed $140 million or around 6 percent of its revenue last year.

It entered the U.S. fantasy sports market last year with a $48 million acquisition of early-stage operator DRAFT.

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FanDuel was part of merger discussions last year with rival DraftKings but that plan was scrapped after a legal challenge by the U.S. Federal Trade Commission over fears that the combined company would control more than 90 percent of the U.S. market for paid daily fantasy sports contests.

Leading fantasy sports companies have faced regulatory challenges in several states and scrutiny by officials who question whether paid daily games amount to gambling.

FanDuel was valued at more than $1 billion before the crackdown began. Legal Sports Report (LSR), which first reported that Paddy Power Betfair was close to completing the deal, said it appeared likely to be below that valuation.

Analysts at Davy Stockbrokers said the deal would hand Paddy Power Betfair an extremely well recognized U.S. brand, an award-winning technology platform that can be converted to offer real money betting and a database of over 6 million U.S. customers.

FanDuel would gain access to Paddy Power Betfair’s pricing models, risk and trading expertise, potential distribution via its U.S. businesses and expertise in cross selling, they said.

    “For both sides, a deal would make a huge amount of sense strategically and on the face of it, an amalgamated business would represent a powerful combination in the U.S. sports betting market,” Davy analysts wrote in a note.

    Modern fantasy sports started in 1980 and have exploded online through a faster, daily version of the season-long game where participants draft teams for a single game, enabling them to spend money on contests more frequently.

    Reporting by Padraic Halpin, editing by Louise Heavens and Jason Neely

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