DraftKings Inc. has reached an agreement that would take the sports-betting company public next year, a deal that comes as states around the country move to legalize that form of gambling.
Best known for its fantasy sports games, DraftKings said Monday it will merge with Diamond Eagle Acquisition Corp., a so-called blank-check company that trades on the Nasdaq and is backed by former MGM movie studio Chief Executive
DraftKings also struck a deal to merge with gamgling-technology provider SBTech. Both combinations are expected to be completed in the first half of next year, the company said in a statement.
Several investors, including funds managed by Capital Research and Management Co., Wellington Management Co. and
have agreed to invest $304 million in a class of the combined company’s stock.
DraftKings expects the combined company to have a market value of $3.3 billion at closing and said it would have more than $500 million in unrestricted cash on hand.
A number of states have moved to authorize wagers on sports after a Supreme Court decision last year opened the door to those bets. Twenty states and the District of Columbia have legalized sports betting.
DraftKings estimates the size of the market for online sports betting and other games, like those typically found in casinos, could reach about $40 billion in the U.S., according to a recent investor presentation. It anticipates a potential revenue opportunity from online gambling of $2.9 billion to $4.7 billion, the presentation showed.
The company allows customers to pick athletes and build teams across a range of professional sports and compete in single-day competitions. Other offerings include a mobile app that allows users to play casino games like blackjack and roulette, but that product is only available in New Jersey at present, according to the company’s website.
The combined company will be led by DraftKings co-founder and Chief Executive
and will retain DraftKings’ management team, including co-founders
The SBTech management team will also be integrated into the organization.
SBTech will provide its betting technology and odds-making services that DraftKings has been sourcing from a third-party provider.
“The goal is really to be the only company in the world that is focused primarily on the U.S. market,” Mr. Robins said in an interview.
That includes developing more proposition bets during live games that are focused on U.S. sports—such as betting on the result of the next drive in a football game or pitch in a baseball game—offerings that aren’t as widely available compared with betting on European sports, Mr. Robins said.
—Chris Wack contributed to this article.
Write to Micah Maidenberg at [email protected]
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