June 19, 2023: On Friday, Sports gambling powerhouse DraftKings made a $195 million, all-cash offer for PointsBet’s U.S. investment, it said, topping an earlier proposal by Fanatics.
Fanatics agreed to acknowledge the Australian company’s U.S. operations for $150 million to increase its presence in sports gambling in May.
“While we continue to focus on operating more efficiently and driving substantial organic earnings development in the United States, we will also look to capitalize on compelling opportunities at attractive valuations prudently, as is the case with PointsBet’s U.S. business,” said DraftKings CEO Jason Robins in a statement. “We believe DraftKings is uniquely positioned to advance this outstanding proposal due to our scale and corresponding ability to generate meaningful synergies from the acquisition.”
DraftKings, which is publicly traded, has a market cap of about $10 billion.
Robins said that while the deal wouldn’t be transformative for DraftKings, it would allow the company to increase its market share.
“We do not expect this to impact the path to profitability,” he added.
PointsBet is the seventh-largest sports betting operator in the U.S., but it’s rapidly been shedding cash. The company forecasted a loss of between $77 million and $82 million for the year’s second half.
Joseph Stauff, the analyst at Susquehanna International Group, said the DraftKings bid “highlights the cheap valuation implied by Fanatics’ $150m bid and suggests there’s likely to be some bidding competition. We think this is smart.”
If the deal moves forward, it would be a significant blow to Fanatics’ sports betting efforts, as the company was looking to expand its reach ahead of the NFL season. The deal with Fanatics would have given the company access to at least 15 states where PointsBet already operates.
Fanatics CEO Michael Rubin expressed after the DraftKings announcement that he’s highly skeptical of the agreement, which he views as DraftKings attempting to slow Fanatics down.
“It’s a move to delay our ability to enter the need,” Rubin said. “I guess they are more concerned about us than I thought.”
Rubin estimated that between the offer price of $195 million, a preexisting financial commitment to NBC upward of $250 million, and losses and penalties at PointsBet, DraftKings could take as much as $500 million in costs to close the deal.