Fanatics fends off DraftKings with improved PointsBet US bid
The latest FBG proposal stands at $225.0m (£176.8m/€205.4m), with PointsBet unanimously recommending its shareholders accept the proposal.
FBG had struck an agreement with PointsBet to acquire its US business in May for $150.0m and shareholders were due to vote on this at a meeting on 30 June.
However, earlier this month, news broke that DraftKings had submitted a higher proposal worth $195.0m. PointsBet said it would engage with DraftKings over what it said could be a “superior” proposal.
Upon confirmation of the improved FBG offer, DraftKings announced that it would no longer pursue a deal to acquire PointsBet US.
PointsBet paused trading on the Australian Securities Exchange (ASX) yesterday (27 June) ahead of announcing the improved FBG proposal.
“Superior price plus certainty”
“Following the receipt of a non-binding indicative offer for our US business from DraftKings, the PointsBet team entered negotiations with both parties,” PointsBet chairman Brett Paton said.
“The improved proposal delivers PointsBet shareholders a 50% or $75.0m increase to the acquisition price originally agreed.
“The board unanimously supports the improved proposal from FBG, which provides a superior price plus certainty. FBG conducted their diligence process and negotiations in a highly professional manner at all times.”
The new FBG proposal breaks down into two payments. FBG would pay $175.0m upon the initial completion of the deal, plus $50.0m at the subsequent completion.
“The offer to ‘front end’ the additional consideration is an element which we regarded as a welcome and significant benefit to our shareholders,” Paton said.
“Subject to shareholder and regulatory approvals, our US team will have a strong future as part of the FBG group. PointsBet will build on the opportunities in Australia and Canada underpinned by a strong balance sheet.”
The PointsBet shareholder vote on the FBG proposal will take place on 30 June as originally planned.
PointsBet facilitated a due diligence process on the US business so DraftKings could develop its proposal into a binding offer 27 June.
However, DraftKings was unable to meet this deadline. PointsBet’s board determined the new Fanatics proposal was superior in terms of both pricing and completion certainty.
DraftKings drops out
DraftKings emerged as a possible bidder earlier this month, submitting a higher bid than the initial FBG proposal.
This drew criticism from Fanatics chief executive Michael Rubin, who described the proposal as a “desperate” attempt to slow progress on his deal with PointsBet.
Upon confirmation of the improved Fanatics offer, DraftKings announced that it would no longer pursue a deal to acquire PointsBet US.
“The company is no longer pursuing the acquisition of the US business of PointsBet Holdings,” DraftKings said in a short statement. “The company thanks PointsBet for their time and access over recent weeks.”
Both proposals came after PointsBet in April confirmed it was in talks with “multiple parties” regarding the sale of its North American arm.
The company also said that it had terminated previously reported talks to sell its Australian business to the News Corp-backed gaming venture behind the Betr brand.
Despite this, PointsBet said it remained in discussions with “other third parties” who expressed interest in acquiring the business.
US expansion plans for Fanatics
Should the FBG deal now proceed as expected, it gains access to 12 states. Among those are major betting and igaming hubs, such as New York, New Jersey, Pennsylvania and Michigan.
It significantly accelerates the ecommerce giant’s sports betting roll-out. Its sportsbook is currently live in Maryland, Massachusetts, Ohio and Tennessee.
Last month, FBG chief executive Matt King spoke with iGB about the company’s ambitions for growth in the US. King talked up its prospects for growth, saying it would offer an elevated product to disrupt the established order similar to Spotify carving out a market leading position against iTunes.
While the interview took place before the PointsBet announcement, King alluded to a potential acquisition:
“We can roll out states whenever we want to,” King said. “I have access to all the states, I just roll them out when I’m ready.”
Q1 struggles at PointsBet
This followed a first quarter in which PointsBet posted a 39% year-on-year rise in revenue to AU$106.6m.
North American growth drove this increase, with revenue up 103% year-on-year to $49.8m. PointsBet’s Canadian business also experienced growth over the period; growing 21% on a quarter-on-quarter basis to $6.1m.
Despite this, the group said it expects to make an EBITDA loss of between $77.0m and $82.0m for H2 FY3.
Additionally, the business expects cash outflow, including movements in player cash, to be approximately 30% lower than in H1 FY23. Due to these pressures, the group has attempted to cut costs in order to drive the business towards profitability.