After months of conjecture and speculation, the mammoth merger between DraftKings and sports betting technology provider SBTech has become official.
DraftKings, a daily fantasy sports giant and legal sports betting power, has “entered into a definitive business combination agreement,” according to a release, with Diamond Eagle Acquisition Corp. and SBTech. As a result, among other byproducts, DraftKings will become a publicly-traded company.
Details of the DraftKings deal
Without getting too far into the weeds, institutional investors will funnel some $304 million toward the newly combined DraftKings, which itself will feature a market cap of $3.3 billion and over $500 million in unrestricted cash.
The newly formed company becomes the only US-based vertically integrated sports betting and online gaming company. The deal is expected to close within the first half of 2020.
Diamond Eagle, a publicly traded “special purpose acquisition company,” will change its name to DraftKings once the merger finalizes. As such, DraftKings will become a public company.
“I look forward to building significantly upon our goals of continuing our state-by-state rollout,” said DraftKings CEO Jason Robins, “and creating the most entertaining and engaging customer experiences for sports fans globally.”
Two major sports betting players unite
As it has been well-publicized, DraftKings has grown into a prominent operator in the legal sports betting world. Its DraftKings Sportsbook has evolved into a market-dominant product in New Jersey as well as West Virginia, Indiana and Pennsylvania.
While DraftKings has leveraged its partnership with Kambi Group to develop online and retail sportsbooks, SBTech provides a turnkey solution, as it did for the only mobile sportsbook in Oregon earlier this year.
In an investor presentation, DraftKings noted that it will have a greater ability to release more innovative and unique betting products. With SBTech’s risk management, DraftKings will obtain better odds and more revenue.
In addition, with SBTech in its corner, SBTech will not have to rely on third-party help, aka Kambi. With in-house tech, DraftKings will be able to reduce costs.
DraftKings expanding outlook on gaming
While sports betting has quickly become a significant revenue-driver for DraftKings, the company is keeping its eyes on other verticals, as well.
When considering ways in which to boost betting business, cross-selling via an online casino is a pretty good solution.
In its investor presentation, DraftKings estimated that iGaming and sports betting could generate between $2.9 billion and $4.7 billion in annual revenue. Up to $1.2 billion could stem from iGaming such as online casinos. In New Jersey, 98% of DraftKings’ iGaming customers have been “cross-sold” from other DraftKings products.
How expansive could this merger become?
As noted, DraftKings is already a major DFS and sports betting player and still finding states in which to expand.
SBTech itself is no slouch with partnerships in New Jersey, Pennsylvania, Oregon, Arkansas and Mississippi. Internationally, SBTech operates in Mexico as well as in 15 European countries.
Now, courtesy of this merger, SBTech gains a stronger foothold on American soil. Now, DraftKings has its own tech. Now, if desired, it has an avenue overseas.
Now, DraftKings has more power.