Sports-betting firm DraftKings Inc. is going public in a three-way deal with gaming technology provider SBTech and an acquisition fund founded by former Hollywood executive Jeff Sagansky that values the new firm at about $3.3 billion.
Boston-based DraftKings said it agreed to be sold, alongside SBTech, to Diamond Eagle Acquisition Corp., a publicly traded special purpose acquisition company or SPAC. The combined group will trade under the name DraftKings Inc.
Diamond Eagle is the fifth SPAC set up by serial dealmaker Sagansky, who founded Diamond Eagle with investor Harry Sloan. SPACs raise money from public investors to pursue acquisitions, allowing a private company to go public without an initial public offering.
DraftKings was founded in 2011 as a fantasy sports company. Its earlier investors include the Raine Group, and the owners of the New England Patriots.
The deal allows DraftKings to accomplish its three main goals — combine with SBTech, raise money to help fuel growth and go public — according to co-founder and Chief Executive Jason Robins.
“A lot of companies wait to go public until they’ve hit the end of what is their very obvious growth phase, when they’re already at their scale level,” said Robins, who will be CEO of the new entity. “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.“
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The combined company projects to have $540 million in revenue next year, with $400 million of that coming from DraftKings and $140 million from SBTech, Robins said. It’s expected to grow to $700 million in 2021, with $550 million coming from DraftKings.
The deal continues a string of mergers in the fast-growing U.S. sports-betting market. FanDuel, DraftKings’s longtime fantasy sports rival, was sold to Irish bookmaker Paddy Power Betfair Plc last year. That group later agreed to merge with Canadian betting company Stars Group, which is a partner in the Fox Sports app Fox Bet.