Paddy Power acquires DRAFT fantasy start-up in $65m deal

PADDY Power Betfair has moved on the US fantasy sports market with the acquisition of DRAFT in a deal worth up to US $48 million (AUD $65m).

In documents filed on Wednesday, the Irish bookmaker confirmed it had bought out the start-up company for an initial cash settlement of $19 million (AUD $26m).

That figure could rise by another $29 million (AUD $39m) depending on how the business performs over the next four years.

DRAFT is an early-stage, mobile-first platform on which players compete for cash prizes by picking fantasy teams for popular US sports such as NFL football, NBA basketball and NHL ice hockey.

It has enjoyed significant revenue growth since entering the market in 2015, raising upwards of $4.5 million (AUD $6m) in venture backing.

Paddy Power confirmed that DRAFT’s joint chief executives, Jordan Fliegel and Jeremy Levine, would remain at the helm.

According to PPB chief Breon Corcoran, the merger will allow the mobile-first fantasy platform to flourish with access to greater financial and technological resources.

“We are excited to be bringing DRAFT into the Group and to further increase our presence in the United States,” he said in a statement.

“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.”

Fantasy sports betting is booming in the United States, but PPB and DRAFT will have to work hard to earn a piece of that ever-expanding pie.

While the industry generated over $300 million (AUD $408m) in revenue last year, the vast majority of that money went to the two major operators: DraftKings and FanDuel.

With heavy investment in advertising and development planned for DRAFT, PPB said shareholders should expect an initial EBITDA loss of around $20 million (AUD $27m).