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Fox (FOXA) Receives Green Signal to Buy a Stake at FanDuel

Fox Corporation FOXA has recently received a green flag towards buying a stake in FanDuel, one of the biggest brands in U.S. online gambling.

Fox had been facing a dispute with Flutter, the parent organization of FanDuel, over this deal over the past year, as the latter was demanding too high a price for an option to buy an 18.6% stake in FanDuel.

However, recently, an arbitrator has ruled that Fox has the option to buy a stake in sports-betting operator FanDuel Group from parent company Flutter for about $3.7 billion.

This comes as a strong tailwind for Fox as the deal would aid the performance of Fox Bet, the online sports betting brand of Fox, which has been struggling as it failed to gain traction in the U.S. betting market due to its poor reach and tech.

The deal would help Fox in successfully diversifying itself into the booming wagering business which per Custom Markets Insight is expected to reach around USD 145.6 Billion by 2030 at a CAGR of 12%.

Fox to Bolster Growth With Other M&A’s and Partnerships

Fox Corp recently announced its merger with News Corporation NWSA. This merger would bring back high-profile business divisions under one roof after a split in 2013. Fox’s Fox News, Fox broadcast network, local TV stations and the Tubi streaming service would be combined with News Corp’s Dow Jones, The Wall Street Journal, as well as other assets, including HarperCollins Publishers and news organizations in the United Kingdom and Australia.

This would diversify and broaden the portfolio of Fox Corporation, hence gaining traction with more customers and adding new sources of revenue.

Fox Corporation Price and Consensus

Fox Corporation Price and Consensus
Fox Corporation Price and Consensus

Fox Corporation price-consensus-chart | Fox Corporation Quote

Fox has also entered a multi-year deal with VIZIO VZIO to expand its distribution partnership. The Fox Sports app will now be available on VIZIO smart TVs along with the Fox Weather channel being added to VIZIO WatchFree+ besides existing Fox ad-supported LiveNOW and Fox Soul. VIZIO Ads will also have access to Fox’s premium inventory for audience-based opportunities with advertisers.


In August, Fox announced the completion of a multi-year renewal of its distribution agreement with Verizon for its Fios TV platform.


The agreement included the continued distribution of the entire portfolio of FOX brands, including FOX News Media, FOX Sports, FOX Network and local FOX O&O TV stations in markets including New York, Washington, D.C. and Philadelphia. FOX Weather has also been added to the Fios TV lineup and Tubi is included in both Fios TV set-top boxes, as well as on many other platforms.

 

Threats Attached to the Deals

These mergers and acquisitions and partnerships are expected to bolster Fox’s top line, but they also bring certain headwinds for the company.
The wagering business, into which Fox is expanding, is highly competitive with companies like DraftKings DKNG having already established a secure market position in the sports betting industry.


DraftKings is focusing on its iGaming products as it launched a sportsbook in Kansas at the start of this month. Its Same Game Parlay, which allows multiple betting outcomes from the same game into one parlay bet and feature enhancements like the Web3 strategy, has gained significant anticipation among players.

The merger with News Corporation also brings some risks for Fox. Readers’ preference for accessing news online, mostly free, has made News Corporation’s print-advertising model increasingly redundant. Besides, a major portion of News Corporation’s total revenues is generated outside the United States. The ongoing foreign exchange fluctuation or the U.S. dollar gaining strength may hurt both the top and bottom lines of the company.

This has not boded well among the investors. The shares of Fox Corporation, which currently holds a Zacks Rank #3 (Hold), have declined 19.1% year to date compared to Zacks Consumer Discretionary Sector, which fell 38.4%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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News Corporation (NWSA) : Free Stock Analysis Report
 
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