By Scott Kanowsky
Investing.com -- London-listed shares in Flutter Entertainment PLC (LON:FLTRF) rallied in late-morning trading on Monday after a New York arbitrator ruled on a legal dispute between the sports betting group and Rupert Murdoch-owned Fox Corp Class B (NASDAQ:FOX).
The decision from New York Judicial Arbitration and Mediation Services found that Fox must pay at least $3.7B if it decides to utilize an option to snap up a minority stake in FanDuel, a gambling platform owned by Flutter.
At issue was the valuation of FanDuel. Fox filed a claim in 2021 against Flutter last year, saying that the amount it should pay for the stake ought to be linked to the $11.2B value of FanDuel when Flutter last increased its holding in 2020.
This would have implied a lower price tag for Fox's potential purchase.
However, the arbitration tribunal found that the option should instead be based on a valuation of FanDuel of $20B with an annual compounding carrying value adjustment of 5%. When including this figure, that would mean that Fox would have to pay over $4B for the stake in FanDuel.
Had the ruling been reversed, Flutter would have been forced to sell a stake at a sharply discounted rate. Fox now has until 2030 to make its purchase.
"Today's ruling vindicates the confidence we had in our position on this matter and provides certainty on what it would cost FOX to buy into this business, should they wish to do so," said Flutter chief executive officer Peter Jackson in a statement.
Analysts at Morgan Stanley called the arbitration outcome a "net positive" for Flutter, adding that it adds clarity to the future shape and ownership of FanDuel. The analysts also lifted their price target for Flutter to 16.000p from 15.800p.
Fox claimed its own victory following the ruling, pointing in particular to the 10-year option it has to buy a stake in a "market leading" operation. The media conglomerate said that this purchase will allow it to harness a recent surge in the value of gambling firms.