The former boss for FanDuel Incorporated, Nigel Eccles (pictured), has reportedly filed a lawsuit concerning the recent purchase of the American daily fantasy sports operator by European online and retail sportsbetting and gaming giant Paddy Power Betfair.
Deal valued operator at $465 million:
According to a Tuesday report from Recode, Eccles helped to establish FanDuel Incorporated in 2009 subsequent to being named as its shareholding Chief Executive Officer four years later. But, the Northern Irishman handed over the reins of the firm in November in order to start an eSports company, which was just eight months before Paddy Power Betfair paid some $465 million in order to acquire the New York City-headquartered daily fantasy sports enterprise.
Lawsuit launched in Scottish civil court:
Eccles has now reportedly joined with the three other co-founders of FanDuel Incorporated, which include his wife Lesley, in order to file a lawsuit in Scottish civil court seeking a ruling that could see them pocket some $120 million. The action purportedly alleges that the acquisition deal had deliberately undervalued the daily fantasy sports firm and meant that some of its earliest investors had been paid out first.
Allegations valuation did not consider PASPA repeal:
The plaintiffs’ complaint reportedly moreover contends that this ‘waterfall’ financial arrangement had not taken into account the earlier decision by the United States Supreme Court to invalidate the Professional and Amateur Sports Protection Act (PASPA). This ruling allowed individual states to begin licensing sportsbetting operators and purportedly led to the value of shares in Paddy Power Betfair jumping by 28% in only two weeks.
Despite this change in the landscape, the lawsuit from Eccles reportedly contends that the ruling had not been factored into the valuation of FanDuel Incorporated, which led to the short-changing of those holding non-preferred shares.
Investment firms among defendants:
Recode reported that the legal action seeks to force these early shareholders, which include investment firms Shamrock Capital Advisors as well as KKR and Company Incorporated, to ‘purchase the petitioners’ ordinary shares at market value’.
The lawsuit reportedly reads…
“The decision of the board whose interests are aligned with preference shareholders not to seek and act upon a new market valuation in the face of a material event, which is likely to have significantly increased the market valuation of FanDuel [Incorporated], is a breach of its fiduciary duties.”
FanDuel Incorporated rejects claims:
For its part, FanDuel Incorporated has reportedly responded to the filing of the lawsuit by stating that its claims are ‘simply not rooted in facts or reality’. An unidentified spokesperson for the firm purportedly told Recode that the acquisition deal had involved ‘an exhaustive process’ that had anticipated the ‘likely repeal’ of PASPA.
The spokesperson reportedly stated…
“The deal was consummated consistent with the corporate governance rules and cap table established under the former founders’ leadership. The facts are that this was a sound business transaction that achieved the highest valuation possible for shareholders and was the right strategic move for the company’s future.”