Daily fantasy sports company and bookmaker DraftKings is merging with a special purpose acquisition company, allowing it to become public while forgoing the typical IPO process.
DraftKings is combining with Diamond Eagle Acquisition Corp., a SPAC with a market cap of roughly $500 million, and SBTech, a betting and gaming technology company. The companies announced the deal on Monday.
DraftKings CEO Jason Robins said on CNBC’s Squawk Box that the company was looking acquiring SBTech and and then going public, or to go public first and make the acquisition later, but this structure allowed the two to be done in one step.
“We considered those two along with this, and this allowed us to be both at the same point,” Robins said.
The merger is expected to close in the first half of 2020, according to the announcement. As part of the deal, Diamond Eagle will change its name to DraftKings and change its ticker symbol. The company will trade on the Nasdaq with an estimated market cap of $3.3 billion.
DraftKings and fellow fantasy gaming site FanDuel gained popularity earlier in the decade for their daily fantasy sports products, battling state regulators that argued they were gambling sites. The two companies explored a merger of their own but dropped the idea in 2017 following pushback from the Federal Trade Commission.
Since a 2018 ruling by the Supreme Court that struck down a federal ban on sports gambling, DraftKings has become a gambling bookmaker as well. The company currently offers online and mobile betting in four states, with retail locations in several others.
The sports gambling industry is growing rapidly since the court decision, and some analysts think it could generate as much as $13 billion in annual revenue by 2023.
The deal also includes a $304 million equity investment from several institutional investors that will close at the same time the merger is completed, according to the announcement. Robins said the money raised from the deal will be used to expand operations into other states, such as Michigan and Colorado, that have recently legalizing sports gambling.
“We have a lot of really exciting new markets that we’d like to launch, and that requires capital investment,” Robins said.