With the ultimate aim to cut legal bills and advertising spending after tussling for years to win customers, the two biggest U.S. fantasy sports companies DraftKings and FanDuel said on Friday.
In order to authorize fantasy sports in states that have declared it illegal, both companies separately fund legal defenses and lobbying for legislation and the tie-up could reduce costs for both the companies.
However there was no disclosure of the financial terms of the merger.
Before authorities including New York Attorney General Eric Schneiderman began a crackdown on the industry last year, both the companies had each been valued at over $1 billion.
As websites have made it easier monitor statistics competitively and had eased the manner in which users could create fictional teams of athletes from sports leagues, there has been a tremendous surge in the popularity of fantasy sports.
A turbocharged version of the season-long game, daily fantasy sports has become a multibillion dollar industry. Enabling fans to spend money on contests with a frequency critics compare to sports betting and players draft teams for one evening’s game.
The deal will be structured as a merger of equals. FanDuel CEO Nigel Eccles will be chairman and DraftKings Chief Executive Jason Robins will become CEO. There will be one independent director and each company will receive three board seats.
After running into roadblocks in New York, and then spending time in various state capitals together, deal discussions started last October, Robins and Eccles said in a joint interview.
“We both have really big visions on how to disrupt sports, and it led us to think that together we could build something to compete against ESPN and Yahoo,” Eccles said.
Last month, the companies made a $12 million settlement over false advertising claims with the New York attorney general and the announcement comes after the settlement was made.
As both the companies battled for market share against each other, DraftKings and FanDuel both spent aggressively on TV and online in the past years and therefore the merger could reduce the advertising costs for both jointly.
In the joint statement that was made, both the companies said that the deal will “help the combined company accelerate its path to profitability.”
The merger is expected to close in the second half of 2017 after it is given a green signal by the regulatory authorities. However experts are of the view that since the deal would combine two market leaders, it is likely to attract the attention of antitrust authorities.
KKR & Co LP, Raine Group, Google Capital and the venture arms of Time Warner Inc., Comcast Corp, Fox Sports, Major League Baseball and the National Hockey League are among the high-profile investors backing the companies.
(Adapted from Reuters)