Is Draftkings for sale?

  • Diamond Eagle Acquisition Corp., a special purpose acquisition company, is reportedly in advanced talks to buyout DraftKings.
  • Rival daily fantasy sports and sports betting company, FanDuel, was bought out by U.K. firm Flutter last year.
  • DraftKings and FanDuel tried to merge in 2016, though, pressure from the Federal Trade Commission stopped that.

BOSTON – DraftKings is reportedly in serious discussions to sell out to Diamond Eagle Acquisition Corp., a special purpose acquisition company.

According to Bloomberg, “no transaction has been finalized and talks could fall through.” DraftKings could still look to raise money through another funding round if a sale isn’t finalized.

“DraftKings speaks to a variety of companies regarding various matters in the normal course of business, and it is our general policy not to comment on the specifics of any of those discussions,” the company told Bloomberg via email.

While a buyout may shock fans of the company, the acquisition would fall right in line with industry practices. There have been plenty of mergers and acquisitions in the legal sports betting industry ever since states were given the opportunity to legalize the activity last year.

Shortly after the Professional and Amateur Sports Protection Act (PASPA) was repealed in May of 2018, U.K-based sports betting operator Paddy Power Betfair (now Flutter Entertainment) bought out FanDuel to capitalize on the U.S. sports gambling market.

According to Fortune, Flutter merged it’s U.S. assets with FanDuel and provided the daily fantasy sports operator with $158 million cash to pay down it’s $76 million dollars of debt at the time.

Since then, FanDuel has expanded greatly in states with legal sports betting. They now operate sportsbooks in five states, with online operations in Pennsylvania, New Jersey, West Virginia, and Indiana.

DraftKings attempted to merge with arch-rival company FanDuel before PASPA was repealed, but talks ended in 2017 after the companies faced pressure from the Federal Trade Commission.

However, DraftKings has still been able to keep pace with FanDuel and has been tackling each state that legalizes sports betting as well. Not only does DraftKings’ online sportsbook operate in each state that FanDuel does, but it is also in prime shape to become a licensed operator in New Hampshire.

DraftKings also has the backing of major corporations. According to SportsPro Media, the Walt Disney Company owns a stake in DraftKings through its acquisition of Fox. In 2015, Fox bought a $300 million stake in DraftKings during a funding round.

More recently, DraftKings entered into a partnership with Penn National Gaming in August. The partnership allows DraftKings to have online skins in new states that legalize online sports betting with Penn National properties in them.

Funding seems almost essential for DraftKings to be able to keep up its constantly expanding operations. With that on the table, a sale to Diamond Eagle makes sense. Whether or not their discussions advance will be something investors, as well as all stakeholders in the sports betting industry, keep an eye on.

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