Daily Fantasy Sports Firms Said to Unite Under DraftKings CEOby , , and
After months of talks, FanDuel-DraftKings merger is close
Companies plan to raise money, address regulatory concerns
The two biggest daily fantasy sports companies are close to joining forces under the leadership of DraftKings co-founder Jason Robins, according to people familiar with the merger talks.
Robins is expected to serve as chief executive officer of the combined firm, as yet unnamed. Nigel Eccles, FanDuel’s co-founder, will be chairman of the board, which will draw members evenly from both companies.
Investors have been encouraging a tie-up for months, as Bloomberg News reported in June. With nearly identical games -- players assemble fantasy teams of real-life athletes and win (or lose) based on their on-field performance -- the two companies have spent millions competing with each other, first to attract players, then to fight legal battles. By combining forces, the company could curtail its exorbitant ad spending and unify against its other challenges.
The sticking point in negotiations has been the question of which founder would lead the new company. The people, who asked for anonymity because the talks aren’t public, didn’t say why Robins is expected to lead instead of Eccles. The merger plan also leaves open the possibility of hiring an outside executive to lead the new venture, they said.
According to the people, the new company will likely seek to raise money shortly after the merger, taking advantage of what investors in both companies have said for some time: It makes financial sense for DraftKings and FanDuel to pool their resources instead of spending lavishly competing for the same customers.
Whether a merger of companies that control at least 90 percent of the market is good for consumers will be a question for regulators, and leaders in both companies are preparing to respond to potential antitrust concerns, the people said.
“As a matter of policy, we don’t comment on rumors or speculation,” a DraftKings spokeswoman said in an email, noting that the Boston-based company has previously said a merger would be ‘interesting.’ FanDuel, which is based in New York, also said it wouldn’t comment on speculation.
Last year, both companies were raising money from investors in sports, media and venture capital at valuations over $1 billion each. 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.
Then things slowed, sparked first by questions about a DraftKings employee who may have used inside information to win money on FanDuel. Regulators in several states questioned the legality of the games -- New York attorney general Eric Schneiderman, for example, called it gambling and briefly banned both companies from operating in the state.
The companies have spent the past year fighting challenges and lobbying for legislation that actively legalizes their business, which has been costly. In February, 21st Century Fox wrote down its $160 million investment in DraftKings by about 60 percent. Other estimates suggested that the companies had each lost about half their peak valuations.
Earlier this month the two sites agreed with Schneiderman’s office to pay $6 million each to settle false advertising lawsuits. The New York Times reported at the time that both sites were strapped for cash and having trouble meeting day-to-day operations.