US-based, corporate-backed daily fantasy sports gaming platforms FanDuel and DraftKings called off their previously agreed merger yesterday.
The companies both operate in the daily fantasy sports space, running competitions in which participants can select a line up for a particular round in a sporting league, and then compete with each other to win prizes based on whose team performs best.
FanDuel and DraftKings jointly hold almost all of the North American market for fantasy sports, but have run into trouble not only because of regulatory opposition due to the similarity of their games to gambling, but also because of the marketing expense of an ongoing battle with each other.
The November 2016 merger agreement was intended to solve those issues by enabling the companies to cease competition and instead present a united front against any legal challenges.
However, the US Federal Trade Commission and the Offices of the Attorneys General in the State of California and the District of Columbia, said last month they planned to file a complaint in a district court seeking an injunction to prevent the merger citing risks of higher prices and lower prizes.
FanDuel has raised about $420m in financing and is backed by internet technology conglomerate Alphabet’s CapitalG unit, broadcaster Turner Sports and mass media groups Time Warner and Comcast, as well as several institutional and private investors.
DraftKings had secured approximately $630m from investors including broadcaster Fox Sports, conglomerate Kraft Group, sports leagues Major League Baseball, National Hockey League and Major League Soccer, and closed a $100m round in March 2017 led by investment firm Eldridge Industries.
Nigel Eccles, FanDuel’s CEO, said in a statement: “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.”