FanDuel, DraftKings Agree to Merge, Creating Daily Fantasy Titan

FanDuel and DraftKings have completed their merger agreement, creating a company that would control more than 90% of the turbulent daily fantasy sports industry. The consolidation raises potential antitrust concerns, and federal regulators will need to approve any tie-up. The two companies hope to close the deal in the second half of 2017, according to a joint statement. Terms weren't provided, and the new company doesn't have a name yet. Investors have been encouraging a merger for months, as Bloomberg News reported in June. With almost identical games -- players assemble rosters comprised of real-life athletes, then win (or lose) based on actual on-field performance -- the two companies have spent hundreds of millions of dollars competing with each other, first to attract players, then to fight legal battles. At the same time, neither company has been profitable, even during the industry's boom last year. By combining forces, the new company will spend less on advertising, legal fees and lobbying and more on development and innovation, easing the path to profitability, according to the statement. But the new entity would still seem likely to spend a lot on TV in order to spread the word about any new brand, promote changes in the user experience and generally light a new fire under the business. The new company, co-headquartered in New York and Boston, will probably look to raise money shortly after the merger. A clearer regulatory framework could spur investment both in the new company and the industry as a whole, the companies said. That could further shore up daily fantasy for a future when sports gambling is legalized nationwide, which many sports business executives think is inevitable. At their peak in the fall of 2015, each company was valued at more than $1 billion. Investors in DraftKings include Madison Square Garden Co. and the Kraft Group, which owns the New England Patriots. FanDuel is backed by KKR & Co. and Time Warner Inc., among others. Legal troubles The industry was upended midway through the 2015 NFL season by questions about a DraftKings employee who may have used inside information to win money on FanDuel. Regulators in several states followed by questioning the games' legality -- New York attorney general Eric Schneiderman, for example, called it gambling and briefly banned both companies from operating in the state. Fighting those challenges has been costly. By some estimates, the companies have each lost about half their peak value. In February, 21st Century Fox wrote down its $160 million investment in DraftKings by about 60%. Today, the two sites generate similar revenue. For their Week 9 NFL contests, DraftKings took in $19.5 million in entry fees and paid out $17.1 million in prizes, claiming $2.4 million as revenue, according to data compiled by Legal Sports Report. FanDuel also made $2.4 million that week, on $14.7 million in entry fees. It isn't clear how much a merger will affect fantasy sports fans. The two companies will operate independently until the merger closes, which could take more than a year. After that, the combined unit could choose to continue to run FanDuel and DraftKings as separate sites and apps. It is common for serious daily fantasy players to be active on both. The industry is still facing legal battles in almost a dozen states where the two sites don't operate, including Arizona, Washington and Nevada. The new company will be run by DraftKings co-founder Jason Robins, as chief executive officer. Nigel Eccles, FanDuel's co-founder, will chair a board composed of three executives from both companies and one independent director. -- Bloomberg News

FanDuel, DraftKings Agree to Merge, Creating Daily Fantasy Titan

Featured Stories