The sale of PointsBet’s US sports betting business just got more interesting — and potentially lucrative for the Australian-born gambling company.
DraftKings, one of the top two American sports betting companies by revenue, announced on Friday that it has submitted an offer to purchase PointsBet. Its $195 million cash offer dwarfs a $150 million proposal made by Fanatics last month.
The DraftKings rationale, as outlined in part of the proposal released to the public, includes “the substantial synergies that we expect to be able to capture by combining your US Business with our scaled position in the United States.”
Fanatics CEO Michael Rubin sees another motivation.
Through a spokesperson, Rubin said:
“We are skeptical of the DraftKings proposal which seems like a desperate move to slow down Fanatics and PointsBet from completing the deal as the purchase price and other financial commitments will total more than $500 million — so they are using the majority of their projected year-end cash just to try to block us.”
Industry analysts agree, seeing this as a merger-and-acquisition blocking move on a burgeoning competitor with a massive database of customer emails.
Brendan Bussmann, B2 Global managing partner, told Gaming Today:
Today’s offer by DK screams of going to the block to keep competition out of the market and overpaying for a potential M&A activity. While the tech may add a little to the DK offering, someone is going to have to convince me this is more than just trying to limit competition in the market.”
More DraftKings Reasons for PointsBet Acquisition Attempt
DraftKings’ proposal also included the following:
- Integrating PointsBet‘s “pointsbetting” functionality “will further our product differentiation and drive increased engagement for existing and new users.”
- Adding PointsBet’s tech capabilities will “drive increased margins by eliminating certain external supplier costs.
“While we continue to focus on operating more efficiently and driving substantial organic revenue growth in the United States, we will also look to prudently capitalize on compelling opportunities at attractive valuations, as is the case with PointsBet’s U.S. business,” Jason Robins, DraftKings CEO and co-founder said in the news release. “We believe DraftKings is uniquely positioned to submit this superior proposal due to our scale and corresponding ability to generate meaningful synergies from the acquisition.”
Added DraftKings’ CFO Jason Park, “We expect this transaction to increase our Adjusted EBITDA potential in 2025 and beyond and not impact our expectations of achieving positive Adjusted EBITDA in 2024. We are excited about the potential synergies available by acquiring PointsBet’s U.S. business, including offering our customers interesting new bet types and accelerating our roadmap of bringing in-house more of our mobile sports betting technology.”
In the process, DraftKings could stem the impending expansion attempt of Fanatics, which planned to use PointsBets technology to push beyond the three states where it’s currently offering mobile sports betting.
Details of the DraftKings Offer to Buy PointsBet
DraftKings also offered these points around its acquisition attempt:
- Transaction Perimeter and Structure: Terms and conditions of the deal “are substantially consistent” with the Fanatics offer in terms of what would be purchased.
- Purchase Price and Consideration: $195 million in cash, “on a debt-free and cash-free basis.”
- Financing: DraftKings would pay in cash.
- Required Approvals and Timeline to Closing: Says DraftKings: “As a licensed entity in all of the jurisdictions in which you operate the US Business, we believe that we are uniquely positioned to obtain the requisite regulatory approvals on a more expedient timeframe than under your Existing Agreement with Fanatics. This higher level of deal certainty and speed to completion will enable PointsBet to return capital to its shareholders more quickly, which represents another reason that our Indicative Offer is superior to your Existing Agreement with Fanatics.”
- Internal DraftKings Approvals and Conditions: DrftKings leadership approves, but “as is customary, DraftKings’ entry into definitive agreements will be subject to the satisfactory completion of our reasonable due diligence, the negotiation of mutually acceptable transaction documentation and final internal approvals.”
- Due Diligence; Timeline to Signing a Definitive Agreement: DraftKings believes it could be completed in three weeks.
Wasn’t Fanatics Buying PointsBet?
It thought it was. PointsBet shareholders were to vote on a proposed $150 million offer from Fanatics in late June. This deal was to pay $100 million upon approval and the remainder at fruition.
PointsBet was to hold onto its Australian and Canadian wings and its proprietary points betting racing and igaming platforms. Fanatics stands to benefit much more from PointsBet’s technology, market access and personnel as DraftKings would seem largely built-out nationally. Hence the skepticism about DraftKing’s motivations.
“The acquisition by Fanatics Betting and Gaming of our US business will enable PointsBet to return significant capital to shareholders, while retaining strong Australian and Canadian businesses supported by our leading proprietary technology in a capital-light setting,” PointsBet chairman Brett Paton said at the announcement of the proposal.
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