DraftKings has submitted a non-binding proposal worth $195m to acquire PointsBet US, casting doubt on Fanatics’ bid to secure a takeover.
PointsBet updated investors earlier today that DraftKings has made the bid on a debt-free and cash-free basis with no financing condition. The Australian firm noted that it will now consider the proposals before recommending a decision to shareholders, but placed no timescale on this.
The move from DraftKings sees a race develop for the PointsBet US brand, given that Fanatics had already agreed to a $150m binding deal.
Concluded in May, the deal would see Fanatics acquire PointsBet US, its market access, Banach Tech, and a license for its proprietary technology. PointsBet would retain the Canadian business under the Fanatics proposal.
In the assessment of the bid from DraftKings, the board of PointsBet noted it would consider three factors:
- The amount and timing that shareholders would receive capital
- whether the DraftKings Proposal can be completed in a timely and certain manner
- whether the terms (taken as a whole) of the DraftKings Proposal are more favorable to Shareholders than the Fanatics agreement
Updating investors, PointsBet stated: “It should be noted that the DraftKings Proposal does not constitute a binding offer or commitment on the part of DraftKings to negotiate or execute a definitive agreement and, to this end, there is no guarantee that the DraftKings Proposal will result in a binding definitive agreement.
“Subject to the outcome of the review being undertaken of the DraftKings Proposal, the Board continues to recommend that Shareholders vote in favor of the FBG Transaction.”
PointsBet also explained that, prior to its agreement with Fanatics, it had entered dialogue with “all leading US-based sportsbooks regarding potential strategic relationships”, but that the Fanatics proposal was the most appealing from a shareholder perspective.
Indeed, when unveiling the deal with Fanatics, PointsBet underlined its confidence in concluding a deal promptly.
However, with DraftKings now offering a premium on Fanatics’ $150m agreement, it remains to be seen whether shareholders will see more value in the latter. When the Fanatics agreement was announced, PointsBet’s share price dipped by 18%. At the time of writing, the ASX remains closed for trading since the DraftKings offer was made public.
Fanatics CEO Michael Rubin stated: “We are skeptical of the DraftKings proposal which seems like a desperate move to slow down Fanatics and PointsBet from completing the deal as the purchase price and other financial commitments will total more than $500m – so they are using the majority of their projected year-end cash just to try to block us.”
It is little surprise that PointsBet requires a deal with DraftKings or Fanatics to be concluded quickly, given that there are liquidity issues within its US business.
In its latest trading update, PointsBet revealed that it has the cash to last around one more year and, with a costly NBC marketing deal to fund, decided to seek a sale.
A statement said that PointsBet’s cash balance could not see the US unit through to profitability and that a sale was in the best interest of shareholders.
CEO Sam Swanell told investors: “Despite the strategic success of 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.”
In the US, PointsBet has access to 14 states including New York, the biggest market in the country, and has a TAM of 35% of the adult population.
PointsBet shareholders are set to vote on the Fanatics deal at an EGM penciled in for June 30.
