UK's IG Group bets big on US prediction markets with $1.3 billion Underdog deal
A picture illustration shows U.S. 100 dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao
July 30 : Britain's IG Group said on Thursday it has agreed to acquire U.S. daily fantasy sports and prediction markets operator Underdog for up to $1.3 billion, deepening its push into the fast-growing U.S. retail trading market.
The deal includes an upfront consideration based on an enterprise value of about $1.1 billion and an earnout of about $200 million for Underdog shareholders, IG said.
"The acquisition of Underdog establishes IG as a leader in U.S. prediction markets, one of the most significant opportunities across trading and entertainment, and accelerates our growth in the world's largest and fastest-growing retail trading market," IG CEO Breon Corcoran said.
Prediction markets, which let users trade contracts tied to real-world outcomes, have grown quickly in the United States, though the sector has also drawn scrutiny from lawmakers and regulators.
IG said the acquisition, together with a proposed redomicile, marks the culmination of a strategic review the company kicked off in March.
IG also paused its share buyback programme, expecting to resume it in 2027 subject to completion of its Jersey redomicile, share price performance and other capital demands.
For the Underdog deal, the upfront equity value is expected to be about $963 million, to be paid with roughly 24.1 million new IG shares and about $380 million in cash, while IG will also repay about $160 million of Underdog debt on completion of the deal.
IG, which offers trading in contracts for difference, stocks and cryptocurrencies, said the deal should be broadly neutral to adjusted earnings per share in year one and double-digit percentage accretive by year three.
Separately, it reported an 18 per cent rise in first-half total revenue to £642.8 million and a 4 per cent rise in core profit to £282 million, and said it expects annual results in line with market expectations.
IG Group shares closed up 1 per cent at £17.06 on Thursday.
