Fanatics reaches $150m agreement to buy PointsBet US

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Fanatics has struck an agreement to purchase PointsBet US for $150m in cash as it aims to make a major splash in the US sports betting market. 

Subject to PointsBet shareholder approval, Fanatics will acquire the Australian group’s US sports betting and igaming operations, Banach tech and a license to use the firm’s proprietary technology for $150m. There is no indication of what this will mean for Fanatics’ agreement to use Amelco’s sportsbook technology.

A joint statement read: “Fanatics and PointsBet are excited to enter into an agreement for Fanatics Betting and Gaming to acquire PointsBet’s US business.

“While there are still several steps in the process to complete the acquisition, both parties are confident in the outcome. Fanatics Betting and Gaming and PointsBet will provide further details of the proposed deal and timely updates in the coming weeks.” 

Sources indicated to SBC Americas at SBC Summit North America last week that a deal was in the works, but developments have moved at a fast pace since the conference ended.

Market access for Fanatics as it gobbles up PointsBet

The announcement of the agreement comes just days after SBC Americas spoke one-on-one with Fanatics Betting & Gaming CEO Matt King, who addressed market access opportunities. 

Without giving away anything surrounding the PointsBet deal, King did indicate that the group had “access everywhere”. However, in his keynote address with Eben Novy-Williams on Wednesday, the CEO said that market access opportunities in the US were “pretty bad”. 

He told SBC Americas: “We have access everywhere, with the exception of states like Connecticut, that are super-limited access. We have access to 90 plus percent of the parts of the market.”

PointsBet has market access in 14 US states covering 35% of the adult population, which is in check with Fanatics’ prediction of being live in 12-15 states by the start of the NFL season. 

The Australian group has also enjoyed significant growth in the US, despite failing to reach profitability and having a cash issue. US revenue growth stood at 103% in the 12 months ended Q3, with 115% igaming growth.

Fanatics is in beta testing in Tennessee and Ohio with one live retail sportsbook in the FedEx Field in DC, but now has a much wider US scope with the goal to catch up with the big players such as FanDuel and DraftKings

In his keynote address last week, King revealed that Fanatics has a database of 95 million people, 12 times larger than the database he had at his disposal at FanDuel back in 2018. 

PointsBet cashes in on US momentum as cash dries up

Under the terms of the agreement, PointsBet will continue to meet its funding obligations for the US unit, capped at $21m until the closure of the deal, which includes fees as part of the NBCUniversal partnership. 

The NBCUniversal deal, which was extended until 2027 and was costing around $50m per year, will be transferred to Fanatics once the acquisition is complete.

PointsBet indicated that the deal is, in part, driven by a weaker balance sheet in the US, with the unit “not expected to be cash flow positive in the near term”. In the company’s latest accounts, PointsBet US reported cash to last around one more year and, with a costly NBC deal, decided to seek a sale. 

A statement said that PointsBet’s cash balance could not see the US unit through the profitability and that a sale was in the best interest of shareholders. 

CEO Sam Swanell told investors: “Despite the strategic success building a valuable asset in the US, the costs of operating in a state-by-state environment, together with the requirement to build significant scale to compete against well-capitalized operators, led us to explore a number of options. 

“The sale of the US Business to Fanatics Betting and Gaming delivers the most attractive risk-adjusted value outcome for shareholders compared to the risks and benefits of other options including the status quo.”

“Fanatics Betting and Gaming has recognized our strategy, technology and team, as a platform for their own expansion in the online sports betting and igaming market.”

Despite this sale, PointsBet will still retain a presence in North America with operations in Canada. The group has 28k active users in Ontario and has noted that the market still provides ample North American opportunities. 

Moving forward, Pointsbet anticipates that after offloading the US division, the rest of the business will be running at a breakeven point on an EBITDA basis, with Australian gains offsetting Canadian losses as investment continues in scaling up. 

Swanell added: “I would like to thank Fanatics Betting and Gaming’s CEO Matt King and his team for working with the PointsBet team on the significant amount of constructive diligence that has been done leading to this proposed transaction.”

This deal also indicates further consolidation in the US sports betting market as smaller operators continue to struggle to compete with the giants of the business.

PointsBet chairman Brett Paton also told investors: “The acquisition by Fanatics Betting and Gaming of our US Business will enable PointsBet to return significant capital to shareholders while retaining strong Australian and Canadian businesses supported by our leading proprietary technology in a capital-light setting.”