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This is a developing story and will be updated.
The CEOs of both companies confirmed the move on Thursday.
The move is not entirely unexpected, as the Federal Trade Commission moved to block the tie-up last month.
That forced the two companies to reexamine their options, as a fight to continue the merge would have taken money, time and resources, with an uncertain outcome. A hearing had been scheduled for September in the case, but that is no longer needed, obviously.
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. That argument did not fly with the FTC, which filed suit to stop the merger last month.
It’s certainly possible DraftKings and FanDuel would have prevailed in court, had they fought the action. But the two companies’ fortunes could have changed while it was going on, possibly making the so-called “merger of equals” obsolete.
Here is a statement issued by DraftKings CEO Jason Robins:
“Over the past few years, DraftKings has become the world’s leading fantasy sports company. We are recognized as a global sports entertainment brand and the industry leader in utilizing technology to bring our customers the best fantasy contests and products. We have a growing customer base of nearly 8 million, our revenue is growing over 30% year-over-year, and we are only just beginning to take our product overseas to the billions of international sports fans we have yet to even reach.
Consequently, we believe it is in the best interests of our customers, employees, and investors to terminate our agreement to merge with FanDuel and move forward as a separate company. 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. We appreciate the continued loyalty of our players – it is you, our customers who have made this all possible – and we look forward to kicking off what is going to be our best NFL season yet!”
And from FanDuel CEO Nigel Eccles:
“FanDuel decided to merge with DraftKings last November, because we believed that this deal would have increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry. While our opinion has not changed, we have determined that it is in the best interest of our shareholders, customers, employees and partners to terminate the merger agreement and move forward as an independent company.
“There is still 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. We’d like to thank our partners and customers for their patience, support and continued loyalty over the past several months.”
The company sent a letter to all its users after the announcement, as well:
Today we formally terminated our merger with FanDuel and will withdraw litigation from the Federal Trade Commission (FTC). This means we will move forward as a separate company, which we believe is the best course in the interest of you – our customers and avid sports fans. …
DraftKings remains the preeminent platform in the daily fantasy sports industry. As a result, we are well-positioned to serve as a global hub linking fans to the sports, teams, players and game content they love.
Instead of a merger agreed to last November that would have accounted for more than 90 percent of the DFS market, the two companies will continue as separate entities.
The last nine months had seen an uneasy detente between the companies as they remained rivals preparing to merge.
Instead, they will head into the crucial NFL season as clear competitors once again.
Despite the merger being off, it would appear likely that their coordinated lobbying efforts will continue at the state level.
The two companies have successfully worked in concert to pass laws legalizing and/or regulating daily fantasy in a dozen states, with at least a few more on the way this year.
First up could be finding more money for advertising and promotion ahead of NFL games starting. More than half of the sites’ revenue for the year will likely come from daily fantasy football.
The merger not happening sets up the scenario of a possible “winner take all” scenario for one of the two sites. FanDuel admitted in an FTC filing that DraftKings was the bigger of the two in filings in the merger case. But Eccles also recently said that it could break even in 2018, something it’s not clear DraftKings could do.