In a three-way deal with gaming technology firm SBTech and an investment fund established by former Hollywood executive Jeff Sagansky, DraftKings Inc. is making the new company worth more than $3 billion.
Boston-headquartered DraftKings disclosed it has given the green light to sell to Diamond Eagle Acquisition Corp., a publicly-traded special purpose acquisition firm, along with SBTech.
The merged company will be trading under the name DraftKings Inc. Diamond Eagle is the fifth special-purpose acquisition company formed by Serial Dealer Sagansky, who created Diamond Eagle with investor Harry Sloan.
SPACs collect public investors' money to pursue acquisitions, allowing a private company to become publicly listed without an initial public bid.
Growing US Betting Market
According to co-founder and Chief Executive Officer Jason Robins, the partnership allows DraftKings to accomplish its three main goals: align with SBTech, raise cash to help steer growth and go public.
Robins, who will be the new company's chief executive officer, said that many enterprises are unable to go public until they have reached the end of their period of growth.
According to Robins, during the early days of what "we hope will be a very expansive U.S. market that's developing over the coming years, we are going public, so it gives common shareholders a real chance to drive that growth."
The combined company expects to have next year's revenue of $540 million, with $400 million coming from DraftKings and $140 from SBTech, Robins said in a phone interview. In 2021, the company is expected to grow to $700 million, with DraftKings pegged at $550 million.
Over Half Billion in Standby Cash
In the fast-growing U.S. sports betting industry, the agreement extends a series of fusions. FanDuel, the long-time fantasy sports rival of DraftKings, was sold last year to Irish bookmaker Paddy Power Betfair Plc.
The group later decided to merge with Stars Group, a Canadian betting company that is a partner in the Fox Sports Fox Bet app.
Institutional investors, including funds managed by Capital Research and Management Co., Wellington Management Co. and Franklin Templeton, are committing $304 million to close.
According to a statement Monday, the combined company will have more than half a billion dollars in unrestricted cash. In New York City, Diamond Eagle soared 5.2 percent to $10.70, the biggest increase since this year's launch.
Kambi Group Plc, a SBTech rival, which is a DraftKings technology affiliate, dropped as much as 31 percent Monday before trading in Sweden was suspended.
