No pain, no gain.
DraftKings readied to make some waves in 2020 with two special business mergers. The two other companies involved are SBTech, an international company that provides technology for sports betting and Diamond Eagle Acquisition Corp. (Nasdaq: DEAC) (Diamond Eagle), a special acquisition company (SPAC). As a result of the two mergers, the online sports betting giant aims to be publicly traded and gain a major foothold as a gaming powerhouse.
According to DraftKings, the combined company has a valuation of $3.3 billion. In addition, it will have $500 million of cash on hand through investors.
Notably, the press release touts that “the combined company will become the only vertically integrated pure-play sports betting and online gaming company based in the United States.”
Jason Robins, co-founder and CEO of DraftKings, explained the vision and excitement surrounding the business merger:
The combination of DraftKings’ leading and trusted brand, deep focus on customer experience and data science expertise and SBTech’s highly innovative and proven technology platform creates a vertically-integrated powerhouse. I look forward to building significantly upon our goals of continuing our state-by-state rollout and creating the most entertaining and engaging customer experiences for sports fans globally.
What are SPACs?
According to Bloomberg, Diamond Eagle, the SPAC company, raises money from public investors. In this case, the $500 million will go to pursuing acquisitions. The biggest advantage of a SPAC is to allow a private company to go public without an initial public offering (IPO).
Companies may choose to avoid going through the IPO process lest the WeWork fiasco reoccurs. The Los Angeles Times describes that SPACs, while once known as risky or a last resort, now enjoy a much better image. In addition, there are successful companies that used SPAC deals to their advantage, such as Virgin Galactic.
What does this merger mean for Pennsylvania?
Recall that earlier this year, Legal Sports Report suggested that DraftKings quietly began the process of acquiring SBTech.
At present, the technology entered the Keystone State through Presque Isle Downs Casino. First, Churchill Downs purchased Presque Isle Downs from Eldorado Resorts. After that, Churchill Downs and SBTech inked a long term partnership that made SBTech is the official sportsbook provider. The 50 or so sports betting kiosks are provided by and powered by SBTech. For this reason, it seems likely that the sports betting kiosks will bear the DraftKings’ name when the merger is complete.
Most importantly, the merger gives DraftKings an undeniable advantage at providing an integrated online casino and sports betting outlet.
But what about Kambi?
Similar to SBTech, Kambi Group is also a technology sportsbook provider. You could even say they are direct competitors.
What’s more? Kambi powers DraftKings Sportsbook and has since its launch in August 2018. The two companies entered into a multiyear deal. Additionally, Kambi is set to open a Philadelphia office. Could this merger mean that Kambi is left out in the cold?
Hardly. Robins stated that DraftKings still plans on launching in several states with Kambi. However, the long-term goal is for DraftKings to own its backend technology. The aim here is twofold: 1) to save money and 2) expand product offerings.
This is not a knock in any way on Kambi and it shouldn’t be perceived that way. For us it’s important to own our own technology and own our own product, and regardless of who our partner was, it was something we felt was important over the long-term.
Despite possibly losing DraftKings in the future, Kambi also powers SugarHouse Sportsbook, Rivers Sportsbook, Parx Sportsbook, Hollywood Sportsbook, and South Philadelphia Turf Club in Pennsylvania alone.