FanDuel and DraftKings formally announced their merger intentions last November with an e-mail that confirmed rumors that had been swirling for months. The thinking was that the fantasy giants would be better served by pooling their resources as they seek legal clarity, fight costly legal battles around the United States and look to expand their overseas operations.
From the beginning, there were questions as to whether or not the Federal Trade Commission would approve the merger. As the two largest daily fantasy sites on the planet, FanDuel and DraftKings account for an estimated 90% of the daily fantasy market.
Arguments in favor of the merger pointed to the industry’s low barriers to entry and estimates that the two fantasy sites only account for about 5 million of the 57 million people who participate in fantasy sports of any type (including casual, season-long leagues).
The FTC was unmoved by such arguments and sued last month to block the FanDuel and DraftKings merger. In a statement, the FTC voiced its concerns that the merger would stifle competition with one site now controlling 90% of the market.
The FTC also noted that FanDuel and DraftKings are each other’s most significant competitor. Allowing the merger to proceed, the FTC argued, would “deprive customers of the substantial benefits of direct competition between DraftKings and FanDuel.”
FanDuel and DraftKings released similar statements on Thursday afternoon. Neither company went into details regarding the reason for the termination, but FanDuel CEO Nigel Eccles said they have terminated the agreement even though their “opinion has not changed.” That seems to indicate the companies are simply backing off due to the FTC’s involvement.
Here’s the FanDuel statement (line breaks added):
“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.”
And this is from DraftKings:
“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 who have made this all possible – and we look forward to kicking off what is going to be our best NFL season yet!”
A brief FAQ on the DraftKings website assures customers that nothing has changed. The merger talks are over and business will continue as usual. FanDuel also made sure to let customers know that this announcement will have no impact the FanDuel experience moving forward.