Daily Fantasy Sports Giants DraftKings and FanDuel Officially Announce Merger
DraftKings and FanDuel, the two biggest operators of daily fantasy sports contests, have agreed to merge. The move had been rumored for quite some time, and on Friday they made it official.
Pending regulatory approval, the deal with be finalized some time in the second half of 2017. Exact terms have not yet been disclosed. However, sources close to the negotiations told ESPN it’s basically a 50-50 split. Each company will have three seats on the board of directors. DraftKings CEO Jason Robins will serve as CEO of the new company. FanDuel CEO Nigel Eccles will serve as Chairman of the Board.
Until the deal closes, both sites will continue to operate as usual under their current names.
The official statements from both companies make it sound like the merger was born out of opportunity rather than necessity.
“Joining forces will allow us to truly realize the potential of our vision, and as a combined company we will be able to accelerate the pace of innovation and bring a richer experience to our customers than we ever could have done separately,” says DraftKings CEO Jason Robins.
“Being able to combine DraftKings and FanDuel presents a tremendous opportunity for us to further innovate and disrupt the sports industry,” added FanDuel CEO Nigel Eccles.
The reality, however, is that DraftKings and FanDuel had no choice but to merge. As reported by the New York Times just last month, both DraftKings and FanDuel are essentially broke, having burned through billions trying to get states to legalize daily fantasy contests. At this point, combining resources—and debts—is the only way for either company to stay afloat.
If the new company can survive long enough for enough states to legalize daily fantasy sports betting, it should be able to climb out of debt in no time. That said, with DraftKing and FanDuel commanding 80% of the daily fantasy marketplace, the merger is expected to draw serious scrutiny from regulators, who will want to make sure the deal is good for consumers and competition.
Interestingly, at least some smaller daily fantasy operators do think a merger will benefit them. Apparently they’d rather compete against one huge company than two large companies.
Time will tell if those preferences are correct. In the meantime, good luck getting this Spice Girls song out of your head:
Hat Tip – [ESPN]