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 Welcome to
the News desk.
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| Draftkings and Fanduel agree to merger |
21/11/2016 |
|
 Agencies |
• 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.
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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.
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