DraftKings is looking to outbid Fanatics for PointsBet US, prompting a strong reaction from the ecommerce giant's CEO Michael Rubin.
Tabled today (16 June) – weeks after Fanatics announced plans to acquire the business – the unsolicited non-binding indicative proposal is worth $195.0m (£152.2m/€178.5m). It states DraftKings would purchase the business on a debt-free, cash-free basis with no financing conditions.
PointsBet said its board will now assess the proposal. The group added that the proposal does not constitute a binding offer or commitment from DraftKings to place a firm bid.
The group did not set a date as to when a decision would be reached.
Fanatics’ Rubin: “They are trying to block us”
Responding to news of the DraftKings proposal, Fanatics CEO Rubin said he was “skeptical” of the move. He added that it was a “desperate” attempt to slow progress on Fanatics’ own deal with PointsBet.
“We are skeptical of the DraftKings proposal, which seems like a desperate move to slow down Fanatics and PointsBet from completing the deal,” Rubin said in a statement issued to iGB.
“The purchase price and other financial commitments will total more than $500.0m, so they are using the majority of their projected year-end cash just to try to block us.”
The offer comes after PointsBet last month reached an agreement for the Fanatics Betting and Gaming (FBG) arm of Fanatics to acquire the division.
Should FBG’s initial deal go through, it would grant the business access to 12 states. Among those are major betting and igaming hubs, such as New York, New Jersey, Pennsylvania and Michigan.
However, should PointsBet opt for the DraftKings proposal, FBG would need to seek other routes to these and other markets.
Rival proposals
FBG’s proposal is worth $150.0m and would see PointsBet keep its Canadian and Australian business and operations and continue as an Australian Stock Exchange-listed company.
The FBG offer also included PointsBet retaining its proprietary sports wagering, racing and igaming platform and be granted a royalty-free licence to exploit Banach technology assets.
PointsBet would also retain its teams in Australia, Canada and India, as well as its Australian-based technologists, traders and quants. In addition, PointsBet would provide services to FBG prior to closing of the deal and be reimbursed for the cost of this by FBG.
Shareholder value
In assessing the DraftKings proposal, PointsBet said its board would weigh up whether this would be superior to the already-agreed FBG deal.
PointsBet said this will include assessment of value to shareholders and if terms of the new proposal would be more favourable to shareholders. In addition, PointsBet would consider whether DraftKings’ proposal could be completed in a timely and certain manner.
Subject to the outcome of this review, PointsBet said its board continues to recommend that shareholders vote in favour of the FBG transaction. A vote on the FBG deal had been due to take place at a shareholder meeting on 30 June.
Losses mount in Q1
The latest proposal comes after PointsBet in April confirmed the business was in talks with “multiple parties” regarding the sale of its North American business.
The company also said that it had terminated previously reported talks to sell its Australian business to the News Corp-backed gaming venture behind the Betr brand.
Despite this, PointsBet said it remained in discussions with “other third parties” who have expressed interest in acquiring the business.
This came on the back of a first quarter in which PointsBet posted a 39% year-on-year rise in revenue to AU$106.6m.
The Australian arm saw a 3% drop to $50.7m compared to the $52.3m PointsBet achieved in the same period the previous year.
However, expansion in its North American operations drove the growth, with revenue rising 103% year-on-year to $49.8m. PointsBet’s Canadian business also experienced rapid growth over the period; growing 21% on a quarter-on-quarter basis to $6.1m.
Despite this revenue growth, the company is expecting to make an EBITDA loss of between $77.0m and $82.0m for H2 FY3.
Additionally, the business expects that cash outflow, including movements in player cash, to be approximately 30% lower than in H1 FY23. Due to these pressures, the company has attempted to cut costs in order to drive the business towards profitability.
