The U.S. gambling market is set for significant change, with Australian company PointsBet selling off their operations there and Fanatics announcing a $150 million deal in May to buy those assets. That would be the first entry into the gambling market for Fanatics, better known for their apparel and e-commerce business (although they have recently been venturing into trading cards, NFTs, and more as well). And now, DraftKings is stepping in to try and get PointsBet’s assets themselves, making an unsolicited $190 million all-cash offer Friday:
Surprise!
Market competition in the U.S. sports betting market has heightened dramatically, as DraftKings has made an unexpected bid for PointsBet’s U.S. assets.@AEricFisher breaks it down ⤵️ https://t.co/UpiPtsTyqT
— Front Office Sports (@FOS) June 16, 2023
As Front Office Sports’ Eric Fisher notes in that above story, DraftKings is citing both their higher dollar value and what they believe will be lessened regulatory hurdles, but Fanatics is not thrilled with this:
DraftKings — looking to outflank the oncoming market threat from well-capitalized Fanatics — argues that not only is it offering to pay a 30% premium, but that its bid offers a shorter path for regulatory approvals, greater market synergies, and simpler deal terms.
“We strongly believe that a successful transaction on the basis of our indicative offer represents a truly compelling opportunity for all parties involved and would be in the best interests of PointsBet,” wrote DraftKings chairman and CEO Jason Robins in a letter to PointsBet.
Fanatics, however, blasted the offer as a “desperate” attempt by DrafKings to scuttle the prior deal.
“We are skeptical of the DraftKings proposal which seems like a desperate move to slow down Fanatics and PointsBet from completing a deal,” said Michael Rubin, Fanatics’ CEO, in a statement. “They are using the majority of their projected year-end cash just to try to block us.”
PointsBet is currently in 14 states: Colorado, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, West Virginia, and Virginia. So picking them up would certainly give Fanatics a significant launch for their gambling business. And that would seemingly be much easier than trying to start from scratch and build state-by-state, especially in an era where we’re starting to see some sportsbook consolidation. They also have some team deals, including for the Indiana Pacers’ “PointsBet Hardwood Club” at Gainbridge Fieldhouse seen at top.
Meanwhile, DraftKings is in all of those states already (plus five others with online operations and two with retail-only operations), so this isn’t about new markets for them. But they could integrate PointsBet’s users to bolster their presence in those states. And there are some useful PointsBet content plays as well (including the The Approach golf show with Paige Spiranac, The Straight Line with Ryan Leaf, and more).
It’s uncertain who’s going to come out ahead here, though. For their part, PointsBet’s board released a letter to shareholders saying they’ll evaluate and consider the DraftKings offer. But for now, they continue to recommend approval of the Fanatics one at a meeting set for June 30.
The Company advises that today it has received an unsolicited non-binding indicative proposal from DraftKings Inc. (DraftKings) to acquire the US Business for a headline purchase price of US$195 million in cash, on a debt-free and cash-free basis with no financing condition (the DraftKings Proposal). The Directors of PointsBet are committed to acting in the best interest of all Shareholders and are considering the DraftKings Proposal alongside its advisers.
…As advised in the Notice of Meeting dated 26 May 2023, the entry into the FBG Transaction followed a lengthy process (including price and terms discovery) with significant industry participants, including all leading US-based sportsbooks, regarding potential strategic relationships, and that the Board had then formed the view that the sale of the US Business to FBG delivers the most attractive risk-adjusted value outcome for Shareholders.
In assessing the DraftKings Proposal, the Board will determine whether the DraftKings Proposal could reasonably be expected to lead to a Superior Proposal for the US Business, which will have regard to (amongst other matters): (i) all things which go to Shareholder value, including the amount and timing of capital which will be available to be returned to Shareholders as a result of a transaction; (ii) whether the DraftKings Proposal can be completed in a timely and certain manner; and (iii) whether the terms (taken as a whole) of the DraftKings Proposal are more favourable to Shareholders than the FBG Transaction.
It should be noted that the DraftKings Proposal does not constitute a binding offer or commitment on the part of DraftKings to negotiate or execute a definitive agreement and, to this end, there is no guarantee that the DraftKings Proposal will result in a binding definitive agreement.
Subject to the outcome of the review being undertaken of the DraftKings Proposal, the Board continues to recommend that Shareholders vote in favour of the FBG Transaction.
We’ll see how this plays out. But it’s certainly thrown at least a potential wrench into Fanatics’ entry into the gambling market.
[Front Office Sports; photo from Kelly Wilkinson/The Indianapolis Star, via USA Today Sports]
