Fantasy sports betting startups FanDuel and DraftKings have called off their planned merger, a certain disappointment for everyone involved. Some notes:
• Plans: While no formal integration had happened, the companies were, of course, drawing up plans for the 2017 football season: How to integrate their tech stacks, expansion offerings into new sports and more casual fans, how to keep both brands alive while burning slightly less gigantic piles of cash on advertising now that they aren’t directly competing with each other, etc.
• Back in the C-suite: DraftKings CEO Jason Robbins was set to become CEO of the combined entity; FanDuel head Nigel Eccles was set to become chairman and would no longer be involved in day-to-day operations. Now, Eccles will stay on as FanDuel’s CEO, the company tells Term Sheet.
• Formal statements: Robbins said terminating the merger was in the best interests of DraftKings’ customers, employees, and investors, as it will allow the company to “singularly focus on our mission.” The company cites 8 million users with 30% annual revenue growth.
FanDuel’s Eccles’ statement said FanDuel still believes the merger would have “increased investment in growth and product development thereby benefiting consumers and the greater sports entertainment industry,” but echoed Robbins’ sentiment that ending the merger was in the best interest for all parties. “There is still enormous, untapped market opportunity for FanDuel,” he said.
• What happened? This deal was supposed to be a slam dunk, to shamelessly use a metaphor from a different sport.
Then the FTC stepped in. In June, the FTC said it would try to stop the deal on antitrust concerns, noting that a combined DraftKings and FanDuel would own 90% of the U.S. daily fantasy market.
I asked sources close to both companies if there was anything more to this beyond the regulatory challenges, and they all said the same thing: Nobody wanted another drawn-out, distracting, expensive legal battle that they could easily wind up losing.
This deal was supposed to reduce the amount of resources the companies were spending on regulatory issues. (Remember, each company was fined $6 million for false advertising from the New York attorney general last October.) The companies argued that, separately, they were doubling the resources spent on legal battles — and yes, on advertising against one another – and that ultimately increases cost, which get passed onto consumers. So the only winner here is the T.V. networks, on which those ads will run.
• Why, though? The antitrust scrutiny feels unusual to me. Who didn’t expect these two companies to eventually merge? That’s just what happens with new, novel markets. They start out with dozens of competitors but eventually consolidate down to two, and then, after an intense rivalry, they merge. Groupon bought LivingSocial. ELance merged with ODesk. Sirius merged with XM. Rover bought DogVacay. DraftKings and FanDuel was, I thought, just the latest example.
But daily fantasy sports betting has been a target of regulators for years based on its characterization that fantasy football is a “game of skill.” The companies had hoped to argue that the merger does not create a monopoly because the market for fantasy sports is huge. And it is! But most providers of fantasy software don’t offer betting.
I highly doubt Lyft and Uber would ever merge, but if they wanted to, this deal should be a warning: The FTC apparently only likes mergers between tech startup competitors when they’re tiny, when one or both companies is failing, or preferably, both.
Roku and its underwriters will likely seek to pitch it as the future of television and a firm that can capture significant market share—and revenue—as more content moves off traditional networks and more consumers shift away from traditional cable.
Roku brought in almost $400 million in revenue last year with 15 million active accounts.
Legal shuffling: Term Sheet typically only covers job moves of dealmakers, not lawyers, but this one feels significant: Cooley has hired four prominent partners in New York and D.C., three of which hail from the technology team at Wilson Sonsini Goodrich & Rosati: Adam Dinow, Sacha Ross and Robert Sanchez, as well as former Wilson partner Daniel Peale, most recently general counsel at Gartner.
TV: On her show on Sunday evening, Megyn Kelly will interview six female entrepreneurs about their experiences with sexual harassment in the tech industry: The Muse’s CEO Kathryn Minshew, former MaGIC CEO Cheryl Yeoh, Chewse CEO and co-founder Tracy Lawrence, former Active Collective founder Lindsay Meyer, Wethos CEO Rachel Renock, and Alloy co-founder Laura Spiekerman. Kelly previewed the story this morning without revealing whether it will reveal any new names of harassers.
Correction: Wednesday’s Term Sheet included the wrong description in a funding item about Revere. The company is a New York City-based health startup delivering personally tailored fitness nutrition. Apologies.
IRL: Next week I’ll be in Aspen for my favorite event of the year: Fortune’s Brainstorm Tech conference. I’ll have much more on the event next week, and I’m looking forward to seeing many of you there in person!
THE WEEK IN DEALS:
• 374 M&A deals worth $46.9 billion.
• 12 buyout deals with disclosed values worth $13.3 billion.
• In the U.S., 75 M&A deals worth $11.6 billion and 6 buyouts worth $3 billion.
THE WEEK IN TERM SHEET:
Term Sheet highlighted 87 venture deals, 116 M&A deal, 19 IPOs and 22 new funds.
We discussed reader feedback on the Silicon Valley sexual harassment problem, the latest at Binary Capital, Lightspeed’s role in the mess. Also: reader feedback on the myth that 90% of startups fail, on Uber’s leadership void, on corporations and startups, on the failures of Hello and Jawbone and Blue Apron’s IPO. The hysteria over Amazon-Whole Foods is overblown. Should VC’s avoid publicly criticizing startups? Sun Valley, Buffett’s energy deal, and the cryptocurrency bubble.
THE LATEST FROM FORTUNE...
• AT&T plans to shake up the executive ranks as part of its Time Warner deal.
• Two starkly different views on investing in healthcare.
• Hyperloop One is on step closer to its goal.
• Even the mere perception of bias takes its toll on companies.
• President Trump tells the French First Lady “You’re in Such Good Shape.”
A follow-up on the Amazon-Whole Foods column from this week. Craft beer is getting super quirky. Stuck in an ATM. Do self-driving taxis have a vomit problem? Why sexual harassment is more of a problem in venture capital. One fourth of 2017 tech IPOs are underwater. Milo and the Mercers.
• GrabTaxi Holdings Pte, a Singapore-based ride-hailing platform for the taxi industry, is raising as much as $2 billion from SoftBank Group Corp. and Didi Chuxing Technology Co., according to The Wall Street Journal. Read more.
• Geek+ , a China-based artificial intelligence and robotics company, raised $60 million in Series B funding. Warburg Pincus led the round, and was joined by investors including Volcanics Venture.
• Assent Compliance, a Canada-based environmental compliance startup, raised $40 million CAD ($31.4 million) in Series B funding, according to TechCrunch. Greenspring Associates led the round. Existing investors including Volition Capital, Open Text Enterprise Application Fund, Business Development Bank of Canada, National Research Council of Canada Industrial Research Assistance Program, and Royal Bank of Canada participated. Read more.
• Pendo, a Raleigh, N.C.-based platform for product experiences, raised $25 million in Series C funding. Meritech Capital Partner led the round, and was joined by investors including Battery Ventures, Contour Venture Partners, Core Capital Partners, IDEAFund Partners, Salesforce Ventures and Spark Capital.
• Framebridge, a Lanham, Md.-based custom framing company, raised $16.7 million in Series B funding. Investors include Gordon Segal, Beth Kaplan, New Enterprise Associates, Revolution Ventures, and SWaN & Legend Venture Partners.
• Bevi, a Boston-based company that develops custom beverage machines, raised $16.5 million in Series B funding. Trinity Ventures led the round, and was joined by investors including Horizons Ventures and Tamarisc.
• Cover, a San Francisco-based mobile insurance brokerage platform, raised $8 million in Series A funding and announced a previously undisclosed $3 million seed round, according to TechCrunch. Social Capital led the round. Read more.
• Open Listings, a Los Angeles-based real estate platform, raised $6.5 million in Series A funding. Matrix Partners led the round, and was joined by investors including Initialized Capital and Arena ventures. Read more.
• Insticator, a New York-based website application developer for the ad and publishing industries, raised $5.2 million in Series A funding, according to TechCrunch. Associated Venture Management led the round, and was joined by investors including Mintz & Co. and The Beatson Companies. Read more.
• BloomAPI, a Seattle, Wash.-based medical records company, raised $2.4 million in seed funding, according to TechCrunch. Founders’ Co-op led the round, and was joined by investors including Y Combinator, Slow Ventures, Section 32, Liquid 2 Ventures, Fifty Years Fund, TWB Investment Partnership, Wei Fund, and Parker Conrad. Read more.
• Source Molecular, a Miami-based microbial source tracking service provider, raised $1.6 million in Series A funding. Investors include New World Angels.
• Iantech, a Reno, Nevada-based ophthalmic startup, raised funding of an undisclosed amount. Investors include Global Health Investment Fund and Visionary Venture Fund.
PRIVATE EQUITY DEALS
• Blaze Pizza, a Pasadena, Calif.-based operator of fast-casual pizza stores, sold a “significant non-controlling” stake to Brentwood Associates, according to Bloomberg. The company’s investors include LeBron James, and the deal could be valued at more than $100 million. Read more.
• BARBRI Inc, which is backed by Leeds Equity Partners LLC, acquired iLaw Ventures, a Tuscaloosa, Ala.-based provider of online law school programs. Financial terms weren’t disclosed.
Beaver-Visitec International, a portfolio company of TPG Capital, acquired Vitreq, a Netherlands-based ophthalmic technology company. Financial terms weren’t disclosed.
• VanZandt Controls, a portfolio company of OFS Energy Fund, acquired D.A. Criswell Sales Inc, a Canyon, Texas-based supplier of valves and automation equipment to various sectors such as oil and gas production. Financial terms weren’t disclosed.
• Harrell’s Car Wash Systems Inc, which is backed by Generation Growth Capital, acquired New England Car Wash Equipment, a Littleton, Mass.-based provider of car wash systems and supplies. Financial terms weren’t disclosed.
• Three groups are bidding to buy the Miami Marlins baseball team, from owner Jeffrey Loria: one led by New York-based Wayne Rothbaum that counts Jeb Bush and Pitbull among its investors; another headed by Miami business owner Jorge Mas; and a third that includes Derek Jeter and Michael Jordan. Read more.
• Neoenergia, a Brazilian power utility company, is reportedly working on a dual initial public offering in Sao Paulo and New York, people with knowledge of the matter told Reuters. The offering could value the Neoenergia at up to 35 billion reais, or $11 billion. An IPO may be forthcoming in September.
• John Hancock Financial Services, the U.S. unit of Canadian insurer Manulife Financial, is a candidate for an IPO, the Wall Street Journal reports citing people with knowledge of the matter. In recent months, Manulife has reportedly been working with Morgan Stanley in a bid to sell of parts or all of the John Hancock unit.
• Roku, the Los Gatos, Calif.-based company known for its streaming device, is reportedly looking into an IPO by the end of the year, the Wall Street Journal reported. Roku is said to have hired Morgan Stanley and Citigroup to manage such an offering, and aims for a valuation of about $1 billion. The company is backed by 21st Century Fox, Hearst, Menlo Ventures, Globescan Capital and Fidelity.
• Akcea Therapeutics, a Cambridge, Mass.-based biotech, priced its IPO at $8 a share, raising $125 million by offering 15.6 million shares. The company plans to go public as “AKCA” on the Nasdaq. Novartis agreed to purchase $50 million of Akcea’s common stock in a separate private placement. Cowen, Stifel, and Wells Fargo were joint bookrunners in the offering.
• Cisco agreed to acquire Observable Networks, a St. Louis, Mo.-based network security technology provider. Financial terms weren’t disclosed. Observable had raised more than $4 million in venture funding from MK Capital, DH Capital, and Vectis Healthcare & Life Sciences Fund II.
• Inverness Graham acquired SwipeClock, a South Jordan, Utah-based provider of integrated workforce management software solutions. The seller was NexPhase Capital. Financial terms weren’t disclosed.
• Ivanhoé Cambridge acquired Evergreen Industrial Properties, an Oakland, Calif.-based real estate specialist, from TPG Real Estate. Financial terms weren’t disclosed.
• Temasek acquired a majority stake in Global Healthcare Exchange, a Louisville, Colo.-based provider of connected intelligent healthcare supply chains. Financial terms weren’t disclosed. Thoma Bravo, GHX’s previous owner, will retain a minority stake.
• Magellan Health Inc agreed to acquire Senior Whole Health, a Cambridge, Mass.-based healthcare maintenance company backed by TA Associates, for about $400 million in cash.
• Vertu, a luxury smartphone manufacturer, has gone into liquidation, according to Mashable. The company was bought by Chinese holding firm Godin Holdings in 2015, and then sold again in March of 2017 to a Turkish exiled businessman Hasan Uzan. Read more.
FIRMS + FUNDS
• Saw Mill Capital, a Briarcliff Manor, N.Y.-based private equity firm, raised $340 million for its second fund.
• Union Capital Associates, a Greenwich, Conn.-based private equity firm, raised $200 million for its second fund, Union Capital Equity Partners II, L.P.
• Boyne Capital Partners, a Miami-based private equity firm, raised $126 million for its inaugural fund, BCM Fund I.
• Todd M. Firestone joined Angle Advisors as a managing director. Previously, Firestone was at Evercore Partners.