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Tuesday, November 1, 2016

Draft Kings and Fan Duel merge

Massive destruction of startup value……but hey the upside is..... at least we’ll be seeing less tv ads  :)

Dean Collins
Live Fan Chat inc









 Sweet Sweet Fantasy, Baby: Yesterday a bunch of media outlets reported that, after months of rumors and speculation, DraftKings and FanDuel, the two well-funded fantasy sports betting startups, were finally, really, truly about to merge. Term Sheet readers may remember that when the same rumors flared up back in June, we reported that deal talks were not serious.

You won't have that same debunking here today. This time around my sources say the same thing as everyone else's: The deal is happening. They're not sure why it's taken so long.
It's not a matter of arguing over price. The startups are valued at around $1.3 billion and $1.2 billion and have agreed to a 50-50 stock deal. Bloomberg and others are reporting that DraftKings CEO Jason Robins will be CEO and FanDuel co-founder Nigel Eccles will be chairman of a board that represents each company evenly.
One major catalyst for the deal: A $6 million fine for false advertising from the New York attorney general in October. One source expects that the companies will announce a new settlement as part of the merger or shortly thereafter. (Worth noting: Together they have raised more than $1 billion in venture funding, including from KKR, 21st Century Fox, Comcast Ventures, NBC Sports Ventures, the MLS, MLB Ventures and the NHL.)
DraftKings spokesperson Sabrina Macias didn't deny the deal talks but stressed that it is not done yet:
"As we have stated previously, a potential combination would be interesting to consider. However, as a matter of policy, we don't comment on rumors or speculation, and there can be no assurances at this time that any discussion about a combination would result in an agreement or merger." FanDuel declined to comment.
As I wrote last week, most novel new markets start out with dozens of competitors, but eventually consolidate down to two, and then, after an intense rivalry, they merge. Last week Groupon bought LivingSocial. DraftKings and FanDuel is just the latest example. Up next: music streaming, meal kits, ride hailing…
 PSA: Selling your company for $1 billion doesn't automatically mean you're a billionaire. Selling two companies for $1 billion doesn't even necessarily make you a billionaire.

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