Boston-based DraftKings said it agreed to be sold, alongside SBTech, to Diamond Eagle Acquisition Corp., a publicly traded special purpose acquisition company. 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.

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 Officer 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.“

The combined company projects to have $540 million in revenue next year, with $400 million of that coming from DraftKings and $140 from SBTech, Robins said in a phone interview. It’s expected to grow to $700 million in 2021, with $550 million coming from DraftKings.

Gaming Mergers

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.

Bloomberg News was first to report that Diamond Eagle was in talks to acquire DraftKings.

Institutional investors are committing $304 million at closing, including funds managed by Capital Research and Management, Wellington Management, and Franklin Templeton. The combined company will have more than $500 million of unrestricted cash, according to a statement Monday. Diamond Eagle jumped 5.2% to $10.70 in New York, its biggest increase since going public this year.

DraftKings technology partner Kambi Group, an SBTech competitor, fell as much as 31% Monday before trading was halted in Stockholm. Robins said DraftKings is still planning to launch in several new states as part of its deal with Kambi, but that in the long term, owning its own back-end technology would let the company save money and also have a more direct way to expand its product offerings.

“This is not a knock in any way on Kambi and it shouldn’t be perceived that way,” he said. “For us it’s important to own our own technology and own our own product, and regardless of who our partner was, it was something we felt was important over the long-term.“

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.

SBTech provides backend technology and trading services to gaming companies around the world. It has more than 50 partners in over 20 legal markets, and recently won an exclusive contract to operate sports betting in Oregon through the state lottery.

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