Stars Group Inc. (NASDAQ: TSG) is pursuing a new partnership that includes joint development of a sports-gambling app with Fox Branding. Stars and Fox essentially signed a 25-year deal in which they are expected to launch two apps later this fall.
Stars Group and Fox Sports expect to launch two products under the Fox Bet umbrella. One will be a nationwide free-to-play game, awarding cash prizes to players who correctly predict the outcome of sports games. The second product will give customers in states with regulated betting the opportunity to place real money wagers on the outcome of a wide range of sporting events in accordance with the applicable laws and regulations.
Under the terms of the deal, Fox will acquire 14.35 million newly issued common shares, representing 4.99% of Star’s issued and outstanding shares. Fox will be acquiring these shares for $16.4408 per share, with a total of $236 million in net proceeds from the offering. The proceeds are to be put toward general corporate purposes and to prepay outstanding indebtedness on its first lien term loans.
Also, Fox Sports will grant to Stars an exclusive license for the use of certain Fox Sports trademarks and certain exclusive advertising and editorial integration rights on certain Fox Sports broadcast media and digital assets.
Rafi Ashkenazi, CEO of Stars, commented:
We believe this strategic partnership uniquely positions us to build a leading betting business in the U.S., which represents one of the most exciting long-term growth opportunities for our company. Leveraging our proven media partnership strategy with Sky Sports in the UK, we are excited to partner with FOX Sports to integrate wagering into sports media and drive customer acquisition and retention in the U.S.
Shares of Stars were last seen up about 16% at $20.31, in a 52-week range of $15.10 to $38.95. The consensus price target is $27.78.