Paddy Power buys US sports company for up to $48m

Gambling group takes ‘modest bet on the future’ with move for fantasy sports firm

Paddy Power Betfair has acquired draft, a fantasy sports company, for an initial cash consideration of $19 million. Photograph: Paddy Power Betfair/PA Wire

Paddy Power Betfair has acquired draft, a fantasy sports company, for an initial cash consideration of $19 million. Photograph: Paddy Power Betfair/PA Wire

 

Paddy Power Betfair has acquired Draft, a fantasy sports company, for an initial cash consideration of $19 million (€17.4 million). The mobile-led product is the group’s first foray into the fantasy sports market in the US.

Depending on the performance of the business, a further $29 million will become payable over the next four years.

The Irish-based bookmaker plans to invest substantially in the business in the coming years and forecasts an earnings loss of about $20 million before interest, taxes, depreciation and amortisation.

“Draft has a differentiated product and we believe the business, with the support of our marketing and technology expertise, can take share in the fast-growing daily fantasy sports market,” said Breon Corcoran, chief executive of Paddy Power Betfair.

In a note to investors, analysts at Davy said: “We see this acquisition as a relatively modest bet on the future of the daily fantasy sports market in the US. It provides the group with optionality around the future of this tangential product space in the US and elsewhere and could add to the diversification of the group over time.”

However, the note continued to say that, in the short term, the investment may cause a dip in earnings by around 3 per cent. “However, the market opportunity is such that this dilution could represent a small price to pay for longer-term returns,” it continued.

Last week Paddy Power Betfair announced a growth in operating profit of 114 per cent in the first three months of 2017, while revenues for the same quarter rose to £416 million (€492 million).

The Draft business will continue to be run by its current chief executives, Jeremy Levine and Jordan Fliegel.