On Friday, sports betting giant DraftKings announced it has submitted a $195 million unsolicited bid for PointsBet’s U.S. business. The offer is about $45 million above the one offered by Fanatics last month.
Jason Robins, DraftKings’ Chief Executive Officer and Co-Founder, said: “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.”
“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,” he added.
Jason Robins, DraftKings’ CEO and Co-Founder
Additionally, Jason Park, DraftKings’ Chief Financial Officer, commented: “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,” the executive noted.
PointsBet is the seventh-largest sports betting operator in the US, but it’s rapidly been shedding cash. The company previously forecast a loss of between $77 million and $82 million for the second half of the year.
Jason Park, DraftKings’ Chief Financial Officer
While PointsBet’s board had agreed to the Fanatics deal, shareholders have yet to officially accept Fanatics’ proposition and were scheduled to vote on the prospective acquisition on June 30. Despite DraftKings’ last-minute offer, PointsBet’s board still recommends taking Fanatics’ initial offer, until a thorough review of DraftKings’ newest proposal is conducted.
Michael Rubin, Fanatics CEO, has his suspicions about the latest offer: “We are skeptical of the DraftKings proposal which seems like a desperate move to slow down Fanatics and PointsBet from completing a deal.”
Rubin estimated that between the offer price of $195 million, a preexisting financial commitment to NBC upward of $250 million, and losses and liabilities at PointsBet, DraftKings could assume as much as $500 million in costs just to close the deal.
“It’s a move to delay our ability to enter the market,” Rubin told CNBC. “I guess they are more concerned about us than I would have thought.”
Michael Rubin, Fanatics CEO
Fanatics may have better reasons to acquire PointsBet’s US operations. It should be noted that in New York and Michigan, no licenses would be available for Fanatics without acquisition and that Fanatics may have trouble attaining the New Jersey market, too, without purchasing an existing licensee. New York and New Jersey are the country’s two biggest markets.
Additionally, Michigan and New Jersey are two of only four states that permit iGaming, such as blackjack, poker, baccarat, and craps, which have much higher profit margins than sports betting does.
Research analysts across gaming expect Fanatics to compete with giants DraftKings and FanDuel once the company’s sportsbook launches this fall, ahead of the NFL season. The company could be able to market directly to its millions of customers in the merchandising space, tapping into a large pool of sports fans.
“Backed by Fanatics’ resources for product development and marketing — and a massive database to market to — the operator could take significant share in our view,” Eilers and Krejcik wrote in a recent report.
Original article: https://www.yogonet.com/international/news/2023/06/16/67569-draftkings-outbids-fanatics-with-195m-proposal-to-acquire-pointsbet-39s-us-business
