Edinburgh-based fantasy sports firm FanDuel and its Boston rival DraftKings have agreed to a merger which will allow for “greater investment in growth opportunities and an accelerated path to profitability,” according to press release issued by DraftKings this afternoon.
“Being able to combine DraftKings and FanDuel presents a tremendous opportunity for us to further innovate and disrupt the sports industry,” said FanDuel chief executive Nigel Eccles. “While both companies have accomplished much already, this transaction will create a business that can offer a greater variety of offerings, appealing to new users, including the tens of millions of season-long fantasy players that haven’t yet tried our products.”
DraftKings chief executive Jason Robins will become chief executive of the newly combined company and Eccles its chairman. In addition to the chairman and chief executive, the board will be composed of three directors from DraftKings, three directors from FanDuel and one independent director. The company will be co-headquartered in New York and Boston. FanDuel recently launched a football fantasy product in the UK.
Darren Heitner, a sports finance journalist at Forbes, commented: “FanDuel and DraftKings may try to sugarcoat it, but the main cause for a merger is to limit costs and inch closer to profitability. In Q4 2015, FanDuel spent almost $8 million in legal fees, according to a quarterly meeting recording. It is fair to assume that DraftKings spent a similar amount of money within the same time span.
“Legal costs have not subsided, as attorneys general have scrutinised the practices of FanDuel and DraftKings, and conducted diligence into whether the operators have complied with existing state laws that limit or prohibit gambling. Furthermore, each entity recently settled with the State of New York for a total of $12 million in order to put an end to a lawsuit that alleged each DFS company engaged in false advertising.”