DraftKings Disrupts Fanatics’ Strategy with PointsBet Bid

PointsBet still wants its shareholders to accept Fanatics’ $150 million offer, but they are also considering DraftKings’ $195 million bid, which was made Friday.
Dollar symbol with crown isolated on blue background. 3d illustration. DraftKings Disrupts Fanatics' Strategy with PointsBet Bid
By
June 20, 2023

PointsBet (with the assistance of its financial and legal advisers) will now engage with DraftKings on [their] proposal. Fanatics’ plans to evolve from a sports apparel and memorabilia company into an igaming powerhouse could be in jeopardy, at least in the short term, after DraftKings submitted a rival offer to purchase the US assets of PointsBet.

Last month, Fanatics Betting and Gaming (FBG) made a $150 million stock-and-equity offer for the US operations of Australia-based PointsBet Holdings Limited. At the time, the board at PointsBet, which had been looking to sell its assets since April, unanimously recommended that their shareholders vote in favor of the deal when they meet on June 30.

But DraftKings swooped in with an all-cash offer of $195 million on Friday. And while the board at PointsBet announced Monday that it still recommended its shareholders accept the FBG deal, it was still considering DraftKings’ proposal and conceded that the rival offer, a 30% premium, “could reasonably be expected to lead to a superior proposal.

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“To this end, PointsBet (with the assistance of its financial and legal advisers) will now engage with DraftKings on [their] proposal.”

PointsBet did not say when its review would be concluded or whether the board would change course and recommend its shareholders take the DraftKings offer instead. The board cautioned that DraftKings’ proposal might not result in a binding definitive agreement.

Fanatics Had Planned 16-State Expansion

They are using the majority of their projected year-end cash just to try to block us. The fast-moving developments appeared to set off alarm bells at Fanatics.

It is a late entrant to the market, and the move to acquire PointsBet confirmed what many experts had argued was the best path for Fanatics to become a player in the US sports betting world — by acquiring a smaller operator with limited success in the country. Fanatics opened its first retail sportsbook in January at FedEx Field, home of the NFL’s Washington Commanders, and released beta versions of its BetFanatics mobile sportsbook in Ohio and Tennessee in May.

Fanatics was planning to expand its presence into another 16 states, but DraftKings may have just torpedoed those plans.

“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 $500 million,” Fanatics CEO Michael Rubin said in a statement Friday. “They are using the majority of their projected year-end cash just to try to block us.”

The $500 million figure Rubin referred to is slightly misleading, as he is including $245 million in guaranteed marketing spend via NBC Universal.

Rubin has spoken for years about Fanatics entering igaming and competing with BetMGM, DraftKings, and FanDuel. The company believes it can leverage its sports apparel and collectibles businesses in such a way that it gets people to gamble.

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DraftKings No Stranger to M&A

We believe DraftKings is uniquely positioned to submit this superior proposal due to our scale and corresponding ability to generate meaningful synergies from the acquisition. DraftKings said its $195 million offer is debt-free and would not be subject to any financing condition.

Perhaps more importantly, the Boston-based company’s offer could block Fanatics from expanding — at least for a little while. Fanatics will likely look elsewhere if PointsBet’s shareholders ultimately decide to take the DraftKings offer.

“While we continue to focus on operating more efficiently and driving substantial organic revenue growth in the United States, we will also look to prudently capitalize on compelling opportunities at attractive valuations, as is the case with PointsBet’s US business,” DraftKings CEO Jason Robins said Monday. “We believe DraftKings is uniquely positioned to submit this superior proposal due to our scale and corresponding ability to generate meaningful synergies from the acquisition.”

DraftKings is no stranger to M&A. It tried to acquire Entain for $22.5 billion in 2021 but eventually withdrew its offer. Had DraftKings been successful, it could have walked off with half of its rival, BetMGM. The company completed its acquisition of Golden Nugget Online Gaming (GNOG) in May 2022.

If DraftKings does acquire PointsBet, it could help the company become profitable before 2024.

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