In March, DraftKings CEO Jason Robins and William Hill US CEO Joe Asher engaged in a minor quarrel during the final panel of the American Gaming Association’s Sports Betting Executive Summit.
The verbal exchange was somewhat entertaining.
By the time Robins and Asher see each other at the AGA’s next summit, their companies will be battling for dominance over the growing U.S. sports betting market.
Monday’s announcement that DraftKings would go public through a reverse merger with Diamond Eagle Acquisition, a blank check procurement company, and the sports wagering technology platform SBTech puts the Boston-based company on a new playing field – backed by hundreds of millions of dollars from new investors.
Analysts said DraftKings will be valued at $3.3 billion when the deal closes early next year. The company will then have more than $500 million of unrestricted cash on its balance sheet.
The DraftKings logo on an NHL arena dasherboard
Robins founded DraftKings in 2011 as a daily fantasy sports provider. He told the Wall Street Journal his goal was to be the only sports betting provider “focused entirely on the U.S. market.”
DraftKings was headed down that path even before the ink dried on the Supreme Court’s landmark ruling 19 months ago that opened the U.S. to legal and regulated sports wagering.
The company hired well-respected Las Vegas sportsbook director Johnny Avello in 2018 to oversee the launch of the sportsbook business. As 2019 ends, DraftKings now offers mobile and online sports betting in Indiana, New Jersey, Pennsylvania and West Virginia – with New Hampshire expected to launch on Monday – and has traditional sportsbooks inside casinos and racetracks in Iowa, Mississippi, New Jersey and New York.
And it looks like they’re just getting started. DraftKings also has a deal in place with Penn National Gaming for either the first or second skin in the company’s planned online sports betting operations at more than a dozen casinos and racetracks.
“We’re going public in the early days of what we hope will be a very expansive and large market in the U.S. that develops over the coming years, so it gives public shareholders a real opportunity to ride that growth,” Robins told Bloomberg News.
DraftKings CEO Jason Robins
Robins will remain CEO of DraftKings and will oversee the new public company with his current management team, including co-founders Paul Liberman and Matt Kalish.
SBTech provides backend technology to 20 markets and has the exclusive contract to operate sports betting in Oregon through the state lottery. Its management team will be “integrated into the organization,” which could include Chairman Gavin Isaacs.
In an email, Isaacs, the past CEO of Scientific Games and SHFL entertainment, said he expects to join DraftKings’ newly-created board of directors.
Las Vegas-based William Hill US, a subsidiary of the United Kingdom’s wagering giant, manages sports betting operations for casinos and racetracks in 10 of the 13 current sports betting states. The company signed an agreement last month with Monumental Sports & Entertainment to build and operate a sports book at Capital One Arena in Washington D.C.
The $17.3 billion merger between Eldorado Resorts and Caesars Entertainment provides William Hill the exclusive rights to operate sports betting at all properties owned or managed by Eldorado in the United States, which includes the right to oversee sports betting at the Caesars casinos being acquired in the deal, such as Caesars Palace in Las Vegas.
You can easily see where the competition is heading.
Analysts said the DraftKings deal bodes well for any business in the sports betting sphere.
Morgan Stanley gaming analyst Thomas Allen said DraftKings’ new valuation was “a positive read-through” for Boyd Gaming, Eldorado and Penn, companies he believes will be “meaningful long-term beneficiaries” from the growth of U.S. sports betting.
James Wheatcroft, Jefferies’ United Kingdom-based gaming analyst, said the DraftKings merger was “highly supportive” to the investment case for Flutter, the London-listed company that owns Paddy Power. Last year, Paddy Power acquired FanDuel, DraftKings’ longtime fantasy sports rival, which now operates online and retail sportsbooks in New Jersey, West Virginia and Pennsylvania.
DraftKings and FanDuel tried to merge in 2016, but the partnership was blocked by the Federal Trade Commission due to antitrust concerns. Now, along with William Hill, DraftKings and FanDuel, will provide the growing U.S. sports betting market with a healthy dose of competition.
#HotClicksandPicks This Week – Commentary: DraftKings deal fuels competition in the growing U.S. sports betting market. –@howardstutz, Executive Editor, CDC Gaming Reports. https://t.co/kCorX9iN2q @DKSportsbook #CDCgaming
— CDC Gaming Reports (@CDCNewswire) December 28, 2019
It’s also an interesting juxtaposition for Robins, who during a panel discussion at the 2015 Global Gaming Expo in Las Vegas compared daily fantasy sports to a game of skill, “similar to chess or playing the stock market.”
A month later, the Nevada Gaming Control Board equated daily fantasy sports to gambling and said operators would have to be licensed under regulations governing sports betting providers. DraftKings and FanDuel then both withdrew from the state.
Now, flush with cash, DraftKings – which is in the process of incorporating in Nevada – may have eyes on the Silver State’s sports wagering market, still the nation’s largest.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
