The DraftKings-FanDuel Merger Is Off


There was significant news in the world of daily fantasy sports yesterday.

The news comes less than a month after the companies' respective chief executives, Nigel Eccles and Jason Robins, had declared their intention to pursue the merger in the face of strong opposition from the US Federal Trade Commission, which said it would attempt to block the move.

DraftKings and FanDuel, the two largest daily fantasy sports platforms, had agreed on a proposed merger in November, but in a sudden move Thursday, the companies announced that the deal is off.

Neither company directly addressed the federal government's concerns in brief statements Thursday. "We look forward to kicking off what is going to be our best National Football League season yet".

Experts in sports law had raised doubts that a DraftKings-FanDuel merger would ever pass antitrust muster ever since rumors about the deal emerged previous year. Immediately most industry observers anticipated the agreement would receive close scrutiny from regulators. The deal would have created a powerhouse in the fast-growing daily fantasy-sports segments, but the FTC filed an administrative complaint in June seeking to block it.

Despite being labelled as "Tech Unicorns", both FanDuel and DraftKings remain earnings/profits ineffective, adding further investor pressure.

Even after the merger announcement, DraftKings continued to raise vast amounts money, pocketing $100 million that was seen as a hedge bet in case the merger didn't go through. The issue made it hard for the sites to continue operating in some of their biggest markets, including New York, Texas and IL. The site operates in 40 states. The companies announced plans to merge in November. But their value plunged as they faced legal issues.

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We've reached out to the FTC for comment on the companies' decision to throw in the towel, and will update this post if we hear back.

Purdum notes that the calling off of the merger wasn't necessarily a surprise to those who had been following the story closely.

In their short history, both companies have had their fair share of bouts with authorities in several states that consider daily fantasy sports a form of gambling. The companies said combining into one company would help them lower costs as they tried to turn a profit.

According to an Axios report last month, DraftKings had a $92 million operating loss in 2016, while FanDuel lost tens of millions of dollars through the first 10 months of that year. "Win or lose, at the end of the day, image is everything to these companies".

It's unclear where the merger breakdown leaves the two struggling companies.

DraftKings is in a stronger position on both fronts today, Robins said.