Paddy Power Betfair plc announced a definitive agreement to combine its US business Betfair US with fantasy sports firm FanDuel, which was founded in Edinburgh and now has a major operation in New York.

Under the agreement, Paddy Power Betfair will contribute its existing US assets worth $612 million along with $158 million of cash to take a 61% stake in the combined business, with existing FanDuel investors owning 39%.

“A mechanism has also been agreed to take the group’s ownership of the business to 80% after three years and 100% after 5 years, consisting of call and put options at the prevailing market valuations,” said Paddy Power Betfair.

“The group will have operational control of the business, which will become a fully consolidated subsidiary, and will have the right to appoint the CEO and a majority of the board of directors.

“Existing FanDuel investors will continue to have board representation.

“The transaction is subject to customary regulatory and anti-trust reviews for transactions of this nature and is expected to complete in Q3 2018.”

Paddy Power Betfair CEO Peter Jackson said: “We are excited to add FanDuel to the group’s portfolio of leading sports brands.

“This combination creates the industry’s largest online business in the US, with a large sports-focused customer base and an extensive nationwide footprint.

“The group has leading sports betting operating capabilities globally and strong operations on the ground in the US.

“Together with our substantial financial firepower, we believe we are now well placed to target the prospective US sports betting opportunity.”

FanDuel CEO Matt King said: “We are excited to bring these two great businesses together.

“The combination of brands and team, along with a shared culture and vision for the future, creates the leading gaming destination for US sports fans.“

Goldman Sachs International acted as financial advisor to Paddy Power Betfair plc and Blank Rome LLP acted as legal advisors to Paddy Power Betfair plc in relation to the transaction.

Moelis & Company acted as exclusive financial advisor to FanDuel, and Wilson Sonsini Goodrich & Rosati and Shepherd and Wedderburn LLP acted as legal advisors to FanDuel in relation to the transaction.