PRIVATE equity houses Kohlberg Kravis Roberts (KKR) and Shamrock Capital Advisors have tightened their grip on daily fantasy sports business FanDuel as a result of its board being halved as part of an ongoing restructuring.

The board has been cut from ten members to five after FanDuel was forced to hand a larger chunk of equity to its backers when its planned merger with rival DraftKings fell apart last month.

FanDuel co-founders Lesley Eccles and Tom Griffiths – the company’s chief product officer - have resigned their board positions along with representatives of investors Pentech and NBC Sports Group.

Loading article content

While Alan Resnikoff of Shamrock, which led a $70 million funding round for FanDuel in 2014, has also resigned, his colleague Michael LaSalle remains on the board.

Ted Oberwager of KKR, which led the company’s $275m funding round two years ago, has also kept his board seat as has FanDuel chief executive and co-founder Nigel Eccles.

The other two places have been retained by representatives of early investors Piton Capital and Comcast Ventures, which respectively led a $4m round in 2011 and $11m round in 2013.

This means that FanDuel founders now account for 20 per cent of the board, down from 30 per cent, while Shamrock and KKR control 40 per cent of the board between them, compared with 30 per cent previously.

KKR and Shamrock are also the leaders of a group of investors that have seen their combined shareholding in the company increase from 54 per cent to over 70 per cent due to a merger-termination clause agreed at the start of this year taking effect this month.

In January the company passed a special resolution that said that if FanDuel’s merger with DraftKings did not go ahead as planned the company’s early investors would see their positions in the company slashed in favour of those who invested in 2014 and 2015.

After being faced with a legal challenge by US consumer-protection agency the Federal Trade Commission (FTC), which said the merger was anti-competitive, FanDuel and DraftKings ultimately decided not to proceed with the deal.

That decision means they will no longer have to face the FTC in court, although they are both currently facing a multi-district class action that accuses the companies of, among other things, insider dealing, false advertising and bonus fraud.

They are also involved in ongoing disputes with a number of US states over the legality of the games they offer, with some states ruling that they constitute gambling, which is illegal.

As part of the capital restructuring the number of shares awarded via FanDuel’s management incentive scheme has increased dramatically, with 59 new shares being issued for every one already held, although the rights attached to those have been watered down, with half becoming deferred shares.

Similarly, the rights attached to the shares held by the company’s seed investors - thought to include Mr and Mrs Eccles and Scottish Enterprise - have halved in the same way.

Although it is headquartered in Edinburgh, FanDuel’s revenues come entirely from the US, with customers playing games on its site that are based on the real-life performance of American football and baseball players.

Last year Mr and Mrs Eccles, who founded the company along with Mr Griffiths, head of design Rob Jones and lead engineer Chris Stafford in 2009, moved permanently from Edinburgh to New York to be closer to FanDuel’s main market.

Ms Eccles, who was previously head of marketing at the business, stood down from the position at that point and took a seat on the board as a non-executive director last September.

Earlier this month FanDuel confirmed that it has pulled out of the UK fantasy sports market after launching a site based on the English Premier League last year.