We all knew it was coming, but on Friday morning, DraftKings and FanDuel announced that they have agreed to a merger, a deal which will create a company that will have a virtual monopoly on the daily fantasy sports industry.
Per the press release, DraftKings CEO Jason Robbins will be the new company’s Chief Executive and FanDuel CEO Nigel Eccles will be the Chairman of the Board. The Board of Directors will consist of three people from each of DraftKings and FanDuel with one independent director.
No financial terms have been released, but ESPN.com’s David Purdum reported that sources close to negotiations have indicated that the merger will likely be 50/50.
The companies cite “operational efficiencies and cost savings” as benefits of the merger, as well as the ability to allow for a “greater focus on developing new products and features, including more variety in contest formats, loyalty programs, enhanced social functionality and ancillary sports-oriented content and experiences, all aimed at creating a more diverse, exciting and appealing experience for fantasy sports players and all sports fans.”
Of course, the former rivals also see the merger as a vehicle towards quicker profitability, as well.
The press release continued:
The combined company will be able to invest in strategic partnerships across the sports ecosystem. Media, advertising and other partners will benefit from access to more products and customers as a result of DraftKings and FanDuel’s diverse user base and league relationships, as well as increased investment in advertising. Together, the combined entity can accelerate growth of the fantasy sports category, drive broader and deeper fan engagement, and more efficiently reach those players.
One of the major cost savings that people around the industry are looking at is a reduction in combined legal costs. Both companies have been engaged in legal struggles and lobbying efforts on the state level, draining their coffers of funds to the point where it has been reported that they are having trouble paying the bills. Combining forces allows them to eliminate many of these redundant costs.
Interestingly, at least one competitor hopes the merger passes regulatory hurdles. DRAFT founder and CEO Jeremy Levine told ESPN.com that he essentially sees the combined company being able to pave the way for the “little guys.”
“Prior to the tumult of the past year, FanDuel and DraftKings were well on their way to becoming multibillion-dollar pillar business[es] in sports,” he said. “There still will be massive business built in this space, but it won’t be FanDuel or DraftKings individually. Due to the merger, the opportunity is now there for the few companies that were able to survive and strengthen in the past year.”
If the merger gets the ok from regulators – and that’s a big “if,” considering DraftKings and FanDuel own around 90 percent of the daily fantasy sports market – the deal is expected to be completed in the second half of next year. In the meantime, the two sites will continue to operate separately. At this time, it is not known what the name of the new company will be.
