US-based DraftKings acquires Kyiv-based SBTech betting software developer

On December 23, the US-based company DraftKings that operates in the field of sports betting announced about becoming public company and acquiring SBTech, a provider of betting solutions and services. Rumors about the deal have been circulating in specialized news outlets since June 2019; they plan to finalize the deal within six months.

Deal details

• DraftKings is a daily fantasy sports contest and sports betting provider. The company operates in the U.S. and 8 international markets.

• Before it became possible to bet on real sports in many U.S. states, the segment of fantasy sports (Daily fantasy sports or DFS) developed there. In it, players place bets on virtual teams of real players, the results are calculated based on indicators in real games. In those days, DraftKings and FanDuel were the two largest competitors. Now they are fighting for their position in the open direct sports betting market.
• SBTech develops b2b betting software, as well as virtual casinos and sports platforms for the consumer market. In the b2b segment, it has more than 50 partners in 20 countries, mainly Europe and the Asian region. But SBTech has not been very successful in the U.S. market, writes Onlinepockerreport. Previously, its partner was BetAmerica, whose revenue was 50 times smaller than that of the DraftKings platform.

• In the future, SBTech solutions will be integrated into DraftKings products.
• As market experts told AIN.UA, for betting sites the key feature is not so much the visual quality of the product as technological effectiveness. The technology allows you to accept live bets without delay for all sports, leagues, locations, placing layers of analytics on these events. Buying technology is a method of competing in such a market, especially in the U.S.
• SBTech employs over 1,200 employees.
• Company’s Kyiv office is the second largest. It employs more than 200 people. SBTech’s important technical functions are concentrated there, including managed services for customers, research and product development (R&D), development for sports trading, and technical support, the company informed AIN.UA.
• In Ukraine, SBTech, like Playtech, was using the outstaffing services of Ciklum until 2017. And then, like Playtech, they left Ciklum, opening their own office. The head of the Kyiv office was Marie Zisman.
• Previously, another company, Kambi, was a technological partner of DraftKings. Amid an acquisition deal and the likely loss of a major customer, its shares dropped.

• Formally, the deal will be executed through a third party – Diamond Eagle Acquisition Corp (DEAC) already registered on the NASDAQ exchange. Firstly, DraftKings and SBTech will merge with DEAC, and then DEAC will change its name to DraftKings Inc., reorganize in Nevada and remain on NASDAQ with a new stock ticker.
• Investments in the new company will amount to $304 million, its expected market value is $3.3 billion. Its accounts will hold about $500 million in free funds.

What’s next

Now the parties to the deal are conducting organizational work – they will finally close the deal by mid-2020. In addition, technical integration between the DraftKings front-end platform and the SBTech platform will also take time.

The current DraftKings contract with the previous provider Kambi ends only in December 2020. As DraftKings executives said on an investment call, the acquisition will not remove SBTech from the market – it will continue to provide B2B services to other customers.