FanDuel’s founders and more than 100 former employees say the company’s board of directors and private-equity investors intentionally undervalued the sports-betting operator to shut them out of an acquisition deal, according to a lawsuit filed Tuesday.
FanDuel, the fantasy-sports giant now pursuing the growing U.S. sports-betting market, merged with the U.S. operations of Dublin-based gambling operator Paddy Power Betfair PLC in 2018 to create FanDuel Group. Paddy Power was later renamed Flutter Entertainment.
In a lawsuit filed in New York Supreme Court, FanDuel founders and former employees who were shareholders say they received nothing in the all-stock deal, after the board of directors, including current Chief Executive Matt King, and private-equity investors Shamrock Capital Advisors and KKRreduced what the new company was worth.
In response, a FanDuel spokeswoman said the sale to Paddy Power “followed a thorough process in accordance with the company’s governance rules and represented fair-market value.”
Shamrock Capital Advisors and KKR issued a joint statement that said: “We are confident that the facts will demonstrate that the allegations in this lawsuit are completely baseless.”
The deal with Paddy Power was announced about one week after the U.S. Supreme Court issued a decision that cleared the way for states beyond Nevada to legalize sports wagering, opening the door for a new U.S. sports betting industry.
Before that ruling, FanDuel was valued at about $1.2 billion leading up to a proposed merger with rival fantasy-sports app DraftKings, a deal that unraveled under opposition from antitrust regulators in 2017. The lawsuit claims the company maintained its billion-dollar valuation after the merger fell through.
In the 2018 deal with Paddy Power, the lawsuit argues, FanDuel’s board of directors chose not to obtain an independent valuation, ignored the potential implications of legalized sports betting after the Supreme Court’s decision and didn’t hold a shareholders’ vote on the deal.
Full Content: Wall Street Journal
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