DraftKings Tops Fanatics’ Offer, With Last-Minute Bid To Acquire PointsBet for $195M
Australian online gaming provider PointsBet has announced that the board of directors at PointsBet Holdings Limited is considering the last-minute proposal by DraftKings to acquire its U.S. online casino and sports betting operations for $195 million.
Australian online gaming provider PointsBet has announced that the board of directors at PointsBet Holdings Limited is considering the last-minute proposal by DraftKings to acquire its U.S. online casino and sports betting operations for $195 million. The move by DraftKings wouldn’t be good news for Fanatics Betting and Gaming after it offered $150 million last month to acquire PointsBet’s U.S. assets.
Industry insiders have varied opinions about DraftKings’ intentions. Some call the bid a defensive maneuver, while a few see the move as having personal motives.
The New York Post recently reported that Fanatics was in discussions with DraftKings in 2021 regarding a merger leading to a $48 billion deal until, at the 11th hour, Fanatics founder Michael Rubin walked away from the proposed merger deal.
The Post report also claims that unnamed sources say DraftKings CEO, Jason Robins, wasn’t happy with the result of the 2021 deal and wants to “level the score” with Fanatics and Rubin after he ended those negotiations.
Deal Could Block Fanatics Entry Into Online Gaming
Before this latest offer from DraftKings, Fanatics thought it would have a clear path to enter the U.S. online gaming market by acquiring PointsBet. Rubin told CNBC that he’s skeptical of Robins’ motives and feels the DraftKings bid is “a move to delay our ability to enter the market.” However, DraftKings says the move has nothing to do with the rivalry between Robins and Rubin and is focused on the products and technology the deal would provide.
If DraftKings is successful, the merger wouldn’t have a major effect on the U.S. online gaming market. The company currently holds a 29% market share and is operational in all the same states as PointsBet. However, a deal with Fanatics would give the company access to the 15 markets where PointsBet operates and a chance to be up and running by the start of the 2023 NFL season.
DraftKings says it isn’t intentionally trying to block Fanatics, who is trying to get an agreement done in time for the NFL season and needs this deal to help achieve that goal.
DraftKings Agreement Not Without Risk
DraftKings could be taking a risk by acquiring PointBet after company shares plunged by more than 50% since the failed merger with Fanatics. The company lost $390 million in the first three months of 2023, as reports are that PointsBet could ask DraftKings for a “hell or high water” agreement. It would require DraftKings to purchase PointBet’s U.S. assets regardless if all state regulators approve the deal.
A DraftKings deal could also face resistance from the Federal Trade Commission (FTC), which could potentially rule in favor of the Fanatics deal not to let DraftKings obstruct the growth ambitions of a smaller competitor.
DraftKings is the second-largest online betting provider in the country, with no other companies approaching its current market share. The acquisition of PointsBet also wouldn’t help DraftKings make up ground on current market leader FanDuel, which leads all providers with a 45% share of the U.S. market.
PointsBet recommends that shareholders accept the $150 million bid from Fanatics. But the bid from DraftKings will still be considered by the board and might ultimately be too good to resist. The offer will be debt-free, won’t require any financing, and will be an all-cash transaction. PointsBet didn’t say when it would complete its review of the two offers, as shareholders are set to vote on the deal on June 30.