Published: Fri, July 14, 2017
Money | By Armando Alvarado

DraftKings, FanDuel drop merger plans

DraftKings, FanDuel drop merger plans

"For years, the vigorous competition between DraftKings and FanDuel has spurred innovation and favorable pricing".

The merger was initially proposed as a way for the companies to deal with regulatory crackdowns they faced in 2015.

The companies "believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry", FanDuel CEO Nigel Eccles says today.

That was after the U.S. Federal Trade Commission said it would try to block the merger because it would result in the combined companies controlling more than 90 percent of the U.S. market for paid daily fantasy sports.

"We have a growing customer base of almost 8 million, our revenue is growing over 30 percent year-over-year, and we are only just beginning to take our product overseas to the billions of global sports fans we have yet to even reach", Robins said.

By abandoning a deal the companies had contended was critical to their future, DraftKings and FanDuel now return to the familiar - and costly - role of battling each other for the upper hand in the still young daily fantasy sports business.

"This merger would deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel", said Tad Lipsky, acting director of the FTC's Bureau of Competition in the June 19 statement.

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The companies originally announced their intent to merge in November 2016, in a bid to pool their resources to try to become a bigger powerhouse in the fast-growing daily fantasy-sports segments.

Thee two companies had argued that they are part of a larger fantasy sports market, not just the dominant force in a niche part of the larger whole. They are the largest and second largest fantasy sports sites, respectively. The issue made it hard for the sites to continue operating in some of their biggest markets, including New York, Texas and IL. But the FCC said that they don't provide a "meaningful substitute" for daily fantasy sports providers due to "limitations on number of entrants and several other issues".

DraftKings CEO Jason Robins echoed that justification almost word for word.

Each has pulled in big venture capital checks in the time since merger rumors began-DraftKings a $100 million round in March and FanDuel a $55 million convertible note in September-so they could be in a better spot than they were when they first chose to join forces.

Reuters reported on Thursday that the two companies will "terminate a planned merger after a legal challenge by USA antitrust enforcers".

Eccles told Recode earlier this week that FanDuel is also on the right path, saying, "We certainly feel that next year will be a break-even year for us".

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