DraftKings said Monday it will go public through a three-way “blank check” merger as it seeks to capitalize on the spread of online sports betting into new markets.
As part of the blank check deal, DraftKings will merge with Diamond Eagle Acquisition, a special purpose acquisition vehicle that is backed by Hollywood veterans Harry Sloan and Jeff Sagansky. The other party to the deal is SB Tech, a provider of sports betting and gaming technology.
The move will create the “only vertically-integrated pure-play sports betting and online gaming company based in the United States,” the companies said. It comes more than two years after DraftKings scrapped plans to merge with FanDuel, another major player in the daily fantasy sports market, amid pushback from antitrust regulators.
The deal values DraftKings at $3.3 billion.
“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,” DraftKings CEO Jason Robins said in a news release.
“I look forward to building significantly upon our goals of continuing our state-by-state rollout and creating the most entertaining and engaging customer experiences for sports fans globally,” he added.
DraftKings said it has a 60% share of the daily fantasy sports markets, in which fans compete online for cash prizes. It also offers online and retail sports betting in seven states including New Jersey and is eyeing new markets such as Michigan and Colorado, which recently legalized sports gambling.
“The sports gambling industry is growing rapidly since a [2018 U.S. Supreme Court] decision, and some analysts think it could generate as much as $13 billion in annual revenue by 2023,” CNBC reported.
According to DraftKings, the market could ultimately reach about $40 billion in the U.S. and it anticipates a potential revenue opportunity from online gambling of $2.9 billion to $4.7 billion.
DraftKings also said Monday that institutional investors have committed to a $304 million equity investment in the company. “We have a lot of really exciting new markets that we’d like to launch, and that requires capital investment,” Robins said.