Two of the biggest movers and shakers in the U.S. legal gambling expansion industry in 2020 have now teamed up to make news together.
On Monday, Bally’s — the casino company that changed its name from Twin River last fall — announced an all-stock purchase of Monkey Knife Fight, a brash daily fantasy sports company that has emerged as the (distant) no. 3 DFS player in America behind DraftKings and FanDuel.
The announcement notes that Bally’s is “just the third sports betting company in the U.S. to have a fantasy sports segment.”
New Jersey, Colorado, Louisiana, Mississippi, Missouri, Rhode Island, and Delaware feature Bally’s casinos, with pending acquisitions coming in Illinois, Indiana, and Nevada as well as construction of a land-based casino near the Nittany Mall in State College, Pa.
Monkey Knife Fight, meanwhile, is live in 37 states, as DFS typically has not been connected legally with traditional sports betting.
MKF founder Bill Asher developed the brand three years ago with an eye on avoiding the endemic issues at DraftKings and FanDuel, where he felt a small number of experts dominated the prize pools.
Monkey Knife Fight’s angle
Instead, Monkey Knife Fight focuses on “over or under” plays, a variation of those found on sports betting sites. The customer also risks money against the house, not against those DFS “sharps” — an appealing alternative for some players.
MKF daily contests are offered for NFL, NBA, MLB, NHL, eSports, golf, soccer, WNBA, and NASCAR events.
MKF was ranked by SponsorUnited in 2020 as the sixth most-searched and 10th fastest-growing brand in sports and entertainment. The company reports it has 180,000 registered users and 80,000 depositing players.
“Bally’s acquisition of MKF is the latest step in the Company’s long-term growth and diversification strategy to become the first truly vertically integrated sports betting and iGaming company in the U.S. with a B2B2C business model,” reads the press release put out by Bally’s Monday.
“Importantly, it complements Bally’s recent media partnership with Sinclair Broadcast Group and its pending acquisition of Bet.Works, including its proprietary technology stack.
“With this acquisition, we are pleased to enter into the high-growth DFS market. Monkey Knife Fight is a unique asset that we look forward to incorporating into Bally’s constantly growing omnichannel portfolio of land-based casinos and iGaming platforms,” said George Papanier, president and CEO of Bally’s Corporation.
Here’s the key prize for Bally’s
MKF, according to Bally’s, will “support Bally’s plans to develop a potential sports bettors database in states such as California, Florida, and Texas, which are expected to account for 20-25% of U.S. sports betting revenues (according to Wall Street analyst research estimates). It will also enable Bally’s to build a player database in Canada, a market that is expected to authorize sports betting in the near future.”
While such a database will be dwarfed by DraftKings and FanDuel, it would still give Bally’s a head start if and when those giant states legalize sports betting. DFS companies have trounced traditional casino companies in acquiring sports betting market share in states like New Jersey, with DFS players generally proving more amenable to trying that new legal gambling avenue than casino players.
“Since our inception, we have distinguished ourselves from competitors by providing the best experiences for our valued players, forming strategic partnerships with teams, ownership groups, and players unions, and acquiring strategic assets to bolster our position in the market,” said Asher.
MKF last fall acquired rival FantasyDraft to further solidify its third-place status in the DFS universe. In 2017, FantasyDraft had acquired Fantasy Aces in a similar play.
“We make our games fun, and our whole brand fun,” Asher told US Bets in September. “It’s a silly name, and customers buy our merchandise and our concept. Typical DFS just isn’t fun.”
In a prescient comment, Asher, who also appeared on the Gamble On podcast last year, noted that FanDuel and DraftKings had lost their focus on DFS due to their burgeoning sports betting and online casino gaming businesses. But Asher wasn’t necessarily being critical.
“In the next few years, we’ll have gambling and everything else across the board — casino and all,” Asher predicted.
The fine print
As part of the acquisition, MKF is set to receive immediately exercisable penny warrants to purchase up to approximately $50 million in Bally’s common shares (subject to adjustment) at closing, and (2) contingent penny warrants to purchase up to approximately $20 million in additional Bally’s common shares on each of the first and second anniversaries of closing, for a possible total of up to approximately $40 million.
The contingency relates to MKF’s continued operations in jurisdictions in which it operates at closing. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions.
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