DFS Giants DraftKings, FanDuel Ditch Merger PlansThere Will Be No Combined Company With 90 Percent Market Share |
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Deal is off.
The two juggernauts in the daily fantasy sports space said they will not be joining forces, about a month after the federal government indicated that it would attempt to block the merger due to concerns about it creating a monopoly.
Late last week, both DraftKings and FandDuel announced that what they had called a “strategic merger of equals," which never had a disclosed price, was officially off the table. The deal was announced in November of last year.
According to the SEC, the companies would have controlled some 80-90 percent of the DFS market. According to research released earlier this year from Eilers & Krejcik Gaming, DFS revenue grew by about four percent last year to about $3.26 billion.
The companies wanted the feds to consider their DFS market share within the overall fantasy sports space, but that argument wasn’t successful. Season-long fantasy still has a much broader appeal, with more than five times the estimated number of players than DFS. Nearly 60 million people played season-long fantasy in 2016.
DraftKings said in its statement that it has nearly eight million customers and its revenue is growing 30 percent annually, implying that the company will be fine on its own. Both companies painted the situation as positive for the future, despite both not yet being profitable.
“[W]e believe it is in the best interests of our customers, employees, and investors to terminate our agreement to merge with FanDuel and move forward as a separate company,” DraftKings said. “This will allow us to singularly focus on our mission of providing the most innovative and engaging interactive sports experience imaginable, forever changing the way fans connect with teams and athletes worldwide.”
FanDuel echoed the sentiment, saying that it “determined that it is in the best interest of our shareholders, customers, employees and partners to terminate the merger agreement and move forward as an independent company.”
Despite the popularity of the games, the market projections were slashed earlier this year. Both companies must also spend a huge sum on advertising and legal expenses.
DFS has been approved in more than 10 states, with several others considering the games. One of the most recent to do so was New Jersey, which has legalized online casino gambling and is waiting on the U.S. Supreme Court to strike down PASPA.
Fantasy sports will be considered within the larger sports gambling issue. The casino industry wants all states to be able to opt in to a regulated sports betting framework.
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