Why would a Cayman Islands-based drinks cup billionaire want to spend a chunk of his fortune on the parent of Paddy Power? It’s a question that has been on the tongues of many in the business world in recent months, as Kenneth Dart built up his stake in Flutter.
US-born Dart is sitting on billions of euro worth of paper losses after accumulating a de facto 29 per cent stake in the Irish-domiciled gambling giant, which counts US-focused FanDuel among its other big brands.
Is he an activist investor pushing behind the scenes for the company to change how it operates? Is he contemplating a bid for the entire company? Maybe he just thinks the shares are undervalued and a bargain?
The answer is still not clear, but it seems he isn’t shy about bidding for companies he has stakes in.
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Last week he took his holding in Swedish gambling firm Evolution past 30 per cent, triggering a mandatory takeover bid; any investor whose stake in a company goes over 30 per cent must make an offer for the entire business within four weeks in Sweden.
While Dart won’t need to offer a premium to the current Evolution share price, he will have to offer at least the highest price his Candle Lake vehicle has paid for shares over the past six months.
So what does that mean for Flutter? On the face of it, the two companies have some similarities. Evolution shares have fallen sharply over the past year, dropping as much as 40 per cent. Even after a recent recovery, they are still well below their high of last August.
Flutter, meanwhile, is down almost 70 per cent over the same period – not helped by the 11.5 per cent slump on Wednesday on news of Peter Jackson’s departure and the latest update on quarterly losses alongside another cut in full-year forecasts.
Evolution is valued at about €13.4 billion. That’s just below Flutter but shows that Dart isn’t put off by big numbers.
[ Is reclusive billionaire’s stake in Flutter fuelling bets against it?Opens in new window ]
But does he really want to buy out Evolution? That’s still unclear. And while he has an economic interest in about 29.8 per cent of Flutter shares, he has used derivatives called cash-settled equity swaps to build up part of his stake. Those do not come with voting rights and would not normally count towards the mandatory bid threshold under Irish takeover rules.
Despite the Evolution move, what Dart will do with Flutter next is still unclear. No doubt incoming chief executive Dan Taylor and his team will be watching closely.
