Paddy Power Betfair announced its entry into the daily fantasy sports market in the United States on Tuesday, with the acquisition of an early-stage operator, DRAFT.
"This deal is Paddy Power's first venture into the U.S. daily fantasy sports market".
Paddy Power will pay an initial cash consideration of US$19mln and a further cash consideration of US$29mln depending on the performance of Draft. At the time, Draft co-founder and CEO Jeremy Levine told Crain's that the merger would be good for his business, because there would no longer be "two companies fiercely competing with each other and spending aggressively" on marketing and advertising.
Speaking to business news sources, PPB CEO Breon Corcoran stated that the firms acquired asset had been able to differentiate its product offering within the highly competitive US DFS market, making it an attractive proposition.
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Paddy Power expects to make substantial marketing investment in Draft over the next few years to maximize the growth opportunity of the business.
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". Regardless of the eventual drop in the company's earnings, the future effects of the acquisition would be undoubtedly beneficial for the British operator thanks to the great potential of the market.
The market has almost doubled in value over each of the past three years.