Fanatics is moving closer to achieving its aim of making a splash in the US sports betting market after PointsBet shareholders almost unanimously approved a $225m deal for the US side of the business.
At an Extraordinary General Meeting that took place overnight, 99.2% of PointsBet shareholders backed the deal, enabling Fanatics to purchase the PointsBet US brand.
Fanatics secures PointsBet US deal after DraftKings tussle
Fanatics has made no secret of its intentions of being a significant challenger brand in the US sports betting market this year, stating that it aims to be live in 15 states before the NFL season.
It therefore came as little surprise when rumors at SBC Summit North America came to fruition and it agreed to pay $150m for PointsBet US.
However, DraftKings came in with a non-binding 30% premium offer, worth $195m, which sparked a war of words between the two companies.
In response, Fanatics closed the deal by offering a 50% increase on its original offer, worth $225m, which was the preferred proposal from PointsBet’s perspective. DraftKings failed to provide a binding offer by PointsBet’s deadline and CEO Sam Swannell had a few words about the firms’ professionalism throughout the process.
After securing shareholder approval, the deal can move forward formally, with the payments set to come in two installments. First, there will be a $175m payment at the initial completion of the deal, including the $50m in the revised offer, with the remaining $75m coming once it is finalized.
Fanatics will acquire the PointsBet US business, including the workforce, as well as its market access – subject to licensing – Banach tech and a license for PointsBet’s proprietary tech. The NBC deal will also be inherited by Fanatics.
Following the EGM vote, a Fanatics spokesperson stated: “We are thrilled that the shareholders of PointsBet Holdings Inc. voted to approve our acquisition of the US businesses of PointsBet. We moved decisively to close the deal and we look forward to working with our friends at PointsBet Holdings Inc to finalize the remaining acquisition details.
“This is a pivotal moment for Fanatics Betting and Gaming that will accelerate our growth in the legal online sports betting, advance deposit wagering and igaming markets in the US. Pending regulatory approvals in the various states in which PointsBet operates, we will have more details to share in the coming weeks on how the acquisition of PointsBet US businesses will bring to life our unique vision for Fanatics Betting and Gaming.”
Though regulators in New York have hinted that the licensing process should be as simple as vetting the Fanatics Betting & Gaming senior leadership team, it is unclear how smooth this process will be in the other 13 states where PointsBet is active and if this could slow down the timeline of its full launch.
Currently, Fanatics is in beta launch in Ohio, Massachusetts, Maryland, and Tennessee.
What next for PointsBet?
PointsBet CEO Sam Swannell addressed investors prior to the vote at the EGM, detailing some specifics about the deal and why the company had to sell its US unit.
Swannell explained that, as previously reported, the firm had no realistic path to being cash positive in the near future, with cash reserves remaining for just one more year.
He told investors that the US market became increasingly difficult given the ‘effective duopoly’ of FanDuel and DraftKings, meaning it struggled to obtain significant market share.
“In the US, PointsBet has generally flexed all of our competitive strengths as a challenger business. In particular, we have used our technology to deliver a leading sports betting product experience. But our ability to get to scale and operate at sustainable scale was challenged. We have been competing in a very high-cost operating market with the overlay of capital pressures to continue funding the business through to profitability.
“At the same time, we recently, like other growth stocks, faced the impacts of rising interest rates on attracting investment. As a result, investors have moved away from growth stocks which negatively impacted our valuation and our ability to potentially fund our organic development.”
PointsBet has agreed to commit $21m in further investment in the US division to cover the interim period before the deal is closed.
Once the completion of the deal is finalized, PointsBet shareholders are expected to be paid A$1.39-$1.44 per share from the deal.
Meanwhile, the company will move forward by focusing on its Australian and Canadian businesses.
In Ontario, led by Scott Vanderwel, PointsBet is continuing to invest in its sports betting and igaming platform as a “challenger brand”, but still expects to make near-term losses.
Swannell offered a glimpse into the future of PointsBet Canada: “In both countries, the new PointsBet will grow market share. In Canada, we are a challenger brand. Both have user-friendly leading technology and both will be well-capitalized.
“PointsBet is live in the sports wagering and igaming market in Ontario. The Ontario market structure is attractive for sports and igaming operators. For instance, there are no partner revenue share agreements, unlike most US states, nominal license fees, and an acceptable effective tax rate of 18% of gross gaming revenue.
“The lower capital requirements and higher operating margins relative to most US states create strong prospects for attractive future economics.”
Both Fanatics and PointsBet stated they will outline specific plans for the future of their respective businesses in the coming weeks.