IG Group, a trading platform listed in the UK, has reached an agreement to purchase Underdog, a U.S.-based operator specializing in daily fantasy sports and prediction markets. This acquisition is valued at up to $1.3 billion, marking IG's most significant step into the burgeoning American prediction markets sector.
The deal entails an initial enterprise value of approximately $1.1 billion, with an additional earnout of around $200 million contingent on Underdog achieving specific performance benchmarks.
IG's upfront equity value is projected to be close to $963 million, which will be financed through the issuance of about 24.1 million new IG shares and around $380 million in cash. Additionally, the company plans to settle roughly $160 million of Underdog's existing debt upon the deal's completion.
This acquisition notably enhances IG's footprint in the U.S., where prediction markets have become increasingly popular, allowing users to trade contracts based on real-world event outcomes. IG Group believes this move positions them well to leverage growth in the U.S. retail trading market.
Breon Corcoran, the CEO of IG Group, stated, "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 also mentioned that this purchase, along with its planned relocation to Jersey, concludes the strategic review initiated in March.
Furthermore, the company has paused its share buyback program, indicating that it anticipates resuming repurchases in 2027, contingent on the successful completion of its Jersey relocation, share price performance, and other capital needs.
Financially, IG expects the acquisition to be largely neutral to adjusted earnings per share in the first year, with a projection of double-digit percentage accretion by the third year.
In conjunction with this announcement, IG reported an 18% rise in first-half revenue, totaling £642.8 million ($865.34 million), while core profit increased by 4% to £282 million. The company remains on track to meet full-year results in line with market expectations.