Industry Sports

DraftKings To Go Public In Combination With Diamond Eagle, SBTech

deal

DraftKings and SBTech have joined the consolidation party.

On Monday, one of the leading online sportsbooks in the nascent U.S. market announced a deal that will see it combine with Diamond Eagle Acquisition Corp., a publicly traded special purpose acquisition company, and SBTech, a business-to-business tech company in the online gambling world.

It follows a massive merger of FanDuel parent Flutter Entertainment and The Stars Group this past fall. FanDuel is DraftKings’ No. 1 rival in the online sports betting and casino space.

DraftKings CEO Jason Robins will lead the combined company. The deal with Diamond Eagle had been rumored for about two months. Robins appeared on CNBC on Monday to talk about the deal.

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The business combination agreement includes $304 mm in funding from institutional investors at closing, DraftKings said. The deal will make the combined company the only “vertically-integrated pure-play sports betting and online gaming company based in the United States,” boasted DraftKings.

Deal to help DraftKings enter new jurisdictions

The primary purpose of the deal is to help DraftKings expand into new markets in the U.S. DraftKings currently offers online/mobile sports betting in just Indiana, New Jersey, Pennsylvania, and West Virginia, as well as retail locations in Iowa, Mississippi, New Jersey, and New York.

It is anticipated that the “new DraftKings” will have an equity market capitalization at closing of about $3.3 billion and have more than $500 mm of unrestricted cash on the balance sheet.

The U.S. Supreme Court overturned a federal prohibition on sports betting outside of Nevada in mid-2018. States have been rushing toward regulation since then, but the U.S. online gambling market is still in its infancy and represents a massive opportunity for companies like DraftKings. Sports betting alone is anticipated to be a more than $10 billion market if all 50 states regulated it. That doesn’t include online casino gambling, which is another huge revenue opportunity for DraftKings and its rivals.

DraftKings’ DFS product is available in 43 states and eight international markets.

“The combination of DraftKings’ leading and trusted brand, deep focus on customer experience and data science expertise, and SBTech’s highly innovative and proven technology platform creates a vertically-integrated powerhouse,” Robins said in a presser.

The transaction is expected to close in the first half of 2020.

Gavin Isaacs, SBTech’s Chairman, commented:

“The combination of DraftKings and SBTech brings together two tech-native companies with the customer at their cores. SBTech will maintain its core business and continue its B2B focus. We are excited about the opportunity to join a company with a similar innovation DNA and create a unique and differentiated player in global sports betting and online gaming.”

DraftKings currently uses the Kambi Group to power its online/mobile sportsbook. In the minutes and hours immediately following the DraftKings/SBTech announcement, Kambi’s stock price tumbled.

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