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Draftkings and Fanduel agree to merger 21/11/2016
• DraftKings has confirmed a deal to merge with largest rival daily fantasy sports (DFS) operator FanDuel.

The daily fantasy sports companies DraftKings and FanDuel have agreed to merge after a turbulent year in which both of their values plummeted as several attorneys general questioned the legality of their games in their states.

FanDuel (which was founded in Edinburgh in 2009) has offices in Edinburgh and Glasgow but moved its headquarters to New York several years ago. DraftKings has its headquarters in Boston. The companies offer online fantasy contests across professional sports in the US, Canada and the UK. There are an estimated 57 million fantasy players in the US alone.

The merger has been on the cards for some time, with the two brands now set formally to join forces at some point next year in a move they say will allow them to “better serve consumers”.

The merger must be approved by regulators and will take time — the companies said they expected the deal to close in the second half of 2017. Until then, both sides will operate under their own brands.

The merger was one of necessity: Lobbying and legal costs had damaged both companies’ bottom lines to the extent that representatives of the companies last month asked the New York attorney general’s office to allow them to pay a combined $12 million settlement in installments after claims that they employed false and deceptive advertising practices, two people familiar with those negotiations said.

In recent weeks, according to these two people, FanDuel, based in New York, laid off more than 60 people, and both companies have acknowledged that they are months behind in their payments to vendors, especially to the array of public relations and lobbying firms that they have employed across the nation to persuade individual state legislatures to legalize daily fantasy games — the most critical component of rebuilding their business.

The combined company also plans to invest in strategic partnerships across the professional sports industry, with both brands saying that media, advertising and other partners will benefit from access to more products and customers as a result of the merger.

Jason Robins, chief executive of DraftKings, will take on the same role within the combined company, with FanDuel chief executive Nigel Eccles to serve as chairman of the board, which itself will feature three directors from each operator, as well as one independent director.

“We have always been passionate about providing the best possible experience for our customers and this merger will help advance our goal of building a transformational global sports entertainment platform,” Robins said

FanDuel’s Eccles added: “Being able to combine DraftKings and FanDuel presents a tremendous opportunity for us to further innovate and disrupt the sports industry.

He went on to say, “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.”

Last year, at the beginning of the N.F.L. season, DraftKings and FanDuel overwhelmed sports broadcasts with hundreds of millions of dollars in advertising that emphasized their get-rich-quick prize payoffs. At the time, it was a largely unregulated, multibillion-dollar industry in which players paid a fee on a website, assembled virtual rosters of players in pursuit of jackpots ranging from $22 to $2 million, and scored points based on the real-world outcomes of professional games.

Daily fantasy sports appeared to be a virtual cash machine. The companies were valued at more than $1 billion each. Their investors included Major League Baseball and the N.B.A.; the Dallas Cowboys owner Jerry Jones and the New England Patriots owner Robert K. Kraft; and major media companies like NBC.

After a DraftKings employee won a major jackpot on FanDuel’s site in October 2015, however, Eric T. Schneiderman, the New York State attorney general, began an inquiry into whether employees of the companies had used inside information to prey on customers on each other’s sites. Soon, scores of class-action lawsuits were filed in courts across the country.

Schneiderman shut down the industry in New York, declaring daily fantasy sports to be illegal gambling, but he laid the groundwork for a deal in March when he suggested a June 30 deadline for the State Legislature to act to address the games’ legal status. It did, and Gov. Andrew M. Cuomo signed the bill into law in August.

New York was the eighth state to declare daily fantasy sports legal, and the companies are facing expensive efforts to have their games legalized in the big markets of Illinois and Texas.