FanDuel to merge with rival DraftKings

FanDuel co-founders Nigel Eccles, Lesley Eccles and Tom Griffiths

Manhattan and Edinburgh-based fantasy sports firm FanDuel said on Friday it has agreed to merge with rival DraftKings.

The transaction, subject to regulatory approvals, is expected to close in 2017. Financial terms were not disclosed.

DraftKings CEO Jason Robins will become CEO of the combined company and FanDuel CEO Nigel Eccles will become chairman.

The board will be composed of three directors from DraftKings, three from FanDuel and one independent director.

The combined company will be co-headquartered in New York and Boston.

It was not immediately clear what change — if any — will happen at FanDuel’s Edinburgh base.

Recent $6 million settlements between both firms and the New York attorney general were seen as a key obstacle that needed to be cleared for a merger to take place.

Investors in DraftKings and FanDuel, which are privately held, had been pushing for a merger for some time.

The companies offer a similar service and have faced the same legal challenges to their business models across the United States.

Analysts had placed valuations of more than $1 billion on both firms last year — but both companies have since been fighting regulators in several US states who have claimed their operations amount to illegal gambling and so the valuations of the firms have fallen by as much as 50%, analysts said.

In a joint statement on Friday, the companies said by combining and streamlining resources DraftKings and FanDuel can accelerate work with government officials to continue to develop a standard regulatory framework.

They said this framework will make it easier for the combined entity to thrive in the long-term and “provide certainty and encourage other companies to make significant investments in the fantasy sports industry.”

The companies said the operational efficiencies and cost savings from the merger “will drive a greater focus on developing new products and features, including more variety in contest formats, loyalty programs, enhanced social functionality and ancillary sports-oriented content and experiences …”

They said the merger will also help the combined company “accelerate its path to profitability.”

“Being able to combine DraftKings and FanDuel presents a tremendous opportunity for us to further innovate and disrupt the sports industry,” said FanDuel CEO 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 CEO Jason Robins said: “Joining forces will allow us to truly realize the potential of our vision, and as a combined company we will be able to accelerate the pace of innovation and bring a richer experience to our customers than we ever could have done separately.”