Welcome to The Fly's latest edition of "Bet On It," where we look at news and activity in the sports betting and iGaming space.

SECTOR NEWS: Flutter Entertainment (PDYPY) announced that it has entered into a conditional agreement to acquire the entire 37.2% interest in FanDuel which is currently held by Fastball for $4.175B. The transaction is conditional on Flutter shareholder approval. "A circular will be posted to shareholders in due course to convene an extraordinary general meeting, which is expected to take place prior to the end of December 2020," the company said. Commenting on the transaction, Peter Jackson, Flutter CEO, said: "Flutter's initial acquisition of a controlling stake in FanDuel in 2018 has been transformational for the shape of the Group. Our number one position in the crucial US market is built on many of the assets we acquired through that transaction, supported by the broader Group's capabilities. Our intention has always been to increase our stake in the business and I'm delighted to be able to do so earlier than originally planned and at a discount to its closest peer... We look forward to continuing to grow our US business, alongside our key media partner FOX, as further states move to regulate sports betting and gaming." Commenting on the transaction, Lachlan Murdoch, Executive Chairman and CEO of Fox Corporation (FOXA) said: "We are delighted to participate in this capital raising. Maintaining our ownership stake in Flutter signifies our long-term commitment to Flutter, and ongoing confidence in management's ability to execute against the fast growing US opportunity. FOX's audiences have proven to be highly engaged with free to play and wagering content, and we are excited to offer them access to products from Flutter's market leading stable of US brands."

Some were arguing at the time of the deal's announcement that Flutter Entertainment's takeout of FanDuel looked bearish for DraftKings (DKNG), as the $4B takeout for a 37% stake implies an $11B FanDuel valuation versus DraftKings' $20B market value, Susquehanna analyst Joseph Stauff told investors in a research note. This analysis is wrong, however, as all minority stake deals are done at a discount and Flutter was afforded a liquidity discount from being a minority partner in exchange for an earlier exit, said the analyst. Stauff pointed out that FanDuel has been able to grow faster than DraftKings in 2020 due to the significant growth of its horse racing asset. He views horse racing as the only "strategic hole" in DraftKings' offering and keeps a Positive rating on the shares with a $55 price target.

Jefferies analyst James Wheatcroft noted that the firm's iGaming and Sports Betting Summit this week included 18 market participants and provided support for the firm's bullish stance on this sub-segment of the industry. The analyst came away from the event more positive on the North American market in particular, as he expects proliferation to continue accelerating, M&A to remain supportive, and wide-ranging strategies to position for success, he told investors. He believes Flutter, GVC (GMVHF) and DraftKings are the best related ideas. Wheatcroft said, "Although the context for proliferation is positive, the commentary suggests that legislative processes in the largest states are complex in NY, FL and CA. In all cases, the presence of Native American interests coupled with other commercial interests challenges an already fluid legislative process. Our focus remains on gubernatorial posture, which has historically proven telling and is less than clear. Nonetheless, expectations are that as sessions begin in 2021, budgetary pressures become clearer and movement for revenue sources highlight sports betting and iGaming."

MICHIGAN: On Tuesday, Jayson Bussa of MiBiz reported the Joint Committee on Administrative Rules, or JCAR, opted to waive the 15-day review requirement for online gaming and sports betting rules submitted by the Michigan Gaming Control Board, or MGCB.  This means that the rules set forth by the MGCB can go into effect without a 15-day waiting period, making online gambling possible a year after Gov. Gretchen Whitmer legalized internet gambling and sports wagering. The MGCB spent much of the first half of 2020 crafting the regulations. “(MGCB) staff will work with operators, platform providers, suppliers and vendors on pre-launch requirements,” MGCB Spokesperson Mary Kay Bean told MiBiz. “Launch depends on many things, including applicants submitting all required information, review of that information, approval of the internet platforms and games and other licensing-related tasks. If everything moves forward smoothly, we hope online gaming and sports betting can begin by the end of the year.”

Oppenheimer analyst Jed Kelly noted that the next steps require the MGCB to approve the rules, and grant final approval for individual online sportsbook operators, a process that usually takes a few weeks. The analyst said, "Michigan is the tenth most populated state in the U.S., and we see total first year opportunity of approximately $150M-$200M based on $19-$26 spend per adult." Retail sports betting received the greenlight in Michigan in March and operators include MGM (MGM), FanDuel, and Penn National (PENN). Kelly told investors in a research note that Michigan could become a significant and competitive sports betting market with 15 licenses for its 24 tribal casinos and three commercial casinos, but the state will not launch OSB until it approves a commercial and tribal partner to launch. Other expected operators include PointsBet and William Hill (CZR). Additionally, The Detroit Pistons and DraftKings announced a new deal, making the sports technology and entertainment company the exclusive Official Daily Fantasy Sports Partner, as well as an Official Sports Betting and iGaming Partner of the NBA team.

SPORTS BETTING ABROAD: Legal Sports Report made two observations that could potentially bode well for sports betting and iGaming in Canada. Ontario announced plans to end its lottery-run monopoly on online gambling and allow private operators entry into the market. Soon after, the Canadian government announced plans to end the federal ban on single-game sports betting. Brad Allen of LSR noted that the nationwide market potential is only if other provinces follow Ontario and do away with their own lottery monopolies. “Once Ontario goes, others are going to go,” said John Levy, CEO of TheScore. “Every province is suffering. They’re all spending enormous amounts of money. And there’s just not much resistance to sports betting anymore. I’d be very surprised if we talk in a year or two and Ontario is an isolated case. Our PASPA moment is just around the corner.” Allen said FandDuel and DraftKings may not have the same marketing head-start they had in U.S. sports betting, but may have the marketing firepower to bridge that gap quickly. 

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Scientific Games (SGMS) William Hill (WIMHY) and Wynn Resorts (WYNN).