DraftKings and FanDuel call off their merger
DraftKings and FanDuel, the leading providers of daily fantasy sports, have called off their merger attempt. Their plans to combine met with opposition from antitrust regulators, so now they'll try to forge their own paths forward as independent companies.
The decision comes less than a month after the Federal Trade Commission and attorneys general from California and the District of Columbia announced that they would file suit to block the deal because the combined companies would control 90 percent of the market for daily fantasy sports. The FTC also issued an administrative complaint, alleging that the deal violated antitrust law.
In statements released to the press, the CEOs of both companies argued that continuing to pursue the deal would have been futile.
"This will allow us to singularly focus on our mission of providing the most innovative and engaging interactive sports experience imaginable, forever changing the way fans connect with teams and athletes worldwide," said DraftKings CEO Jason Robins.
Added FanDuel CEO Nigel Eccles: "There is still [an] enormous, untapped market opportunity for FanDuel, and we will continue to execute our strategy to grow our business and further expand the fantasy sports industry."
Experts in sports law had raised doubts that a DraftKings-FanDuel merger would ever pass antitrust muster ever since rumors about the deal emerged last year. That's because deals combining the top two providers in any market are rarely approved. DraftKings claims it has 8 million customers, while FanDuel reportedly has 6 million registered users.
DraftKings reportedly is preparing to raise more money from investors, who have already poured $270 million into the company since it was founded in 2009, according to the U.K.'s Telegraph newspaper. FanDuel has raised more than $416 million since 2007, CrunchBase said.
The companies, which are reportedly unprofitable, have argued that their merger would provide the legal certainty that would encourage larger players to invest in the industry. They claimed that daily fantasy sports "is just one component of a broader industry that has significant potential for sustained growth."
Revenue at DraftKings is growing more than 30 percent year-over-year, and the company is only just beginning to expand its product overseas, according to Robins. FanDuel has said it's on the path to profitability, but it has declined to provide specifics. Neither company would disclose whether fees were paid related to the deal's cancellation, which often happens.
DraftKings and FanDuel are privately held. At their peaks, each sported valuations of $1 billion and reportedly processed a combined $3 billion in payments in 2015. Both companies bombarded consumers with commercials, building up huge followings.
However, questions emerged about their business practices in 2015 when The New York Times discovered that DraftKings employee Evan Haskell won $350,000 on FanDuel. Both companies now prohibit their employees from playing daily fantasy sports for money.
Note: CBS News parent CBS Inc. has an ownership stake of less than 1 percent in FanDuel.