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PointsBet requests trading halt ahead of Fanatics vote

| By Robert Fletcher
PointsBet Holdings has requested an immediate halt to trading on the Australian Securities Exchange (ASX) days before shareholders are due to vote on Fanatics' acquisition proposal.
Star ASX

The operator submitted the request earlier today (27 June) to allow it to manage continuous disclosure obligations in relation to a “material transaction”.

If granted, the halt would remain in place until the start of normal trading tomorrow (28 June) or when an announcement is made, whichever comes first.

PointsBet added it is not aware of any reason why the request should not be granted, nor of any other information necessary to inform the market about the halt.

As such, no further details were disclosed at this time. However, it comes ahead of a scheduled shareholder vote on Fanatics’ proposal to acquire PointsBet’s US business, on 30 June.

DraftKings joins acquisition race

The trading halt comes after DraftKings submitted a rival proposal to acquire PointsBet US.

That proposal is worth $195.0m (£153.0m/€178.5m), with DraftKings looking to enhance its sportsbook product through PointsBet’s trading capabilities and unique Pointsbetting product.

DraftKings’ move prompted an angry response from Fanatics chief executive Michael Rubin, described the proposal as a “desperate” attempt to slow progress on his deal with PointsBet.

Fanatics Betting and Gaming struck a deal purchase PointsBet US for $150.0m in May.

It arguably has more to gain from the deal. Should Fanatics complete the acquisition, it would gain access to 12 states. Among those are major betting and igaming hubs, such as New York, New Jersey, Pennsylvania and Michigan.

However, should PointsBet opt for the DraftKings proposal, FBG would need to seek other routes to these and other markets.

Potentially “superior” bid

In the days after the DraftKings proposal was tabled, PointsBet said it would engage with the group, saying the proposal could be “superior” to the Fanatics deal.

However, PointsBet reiterated the DraftKings proposal does not constitute a binding offer or commitment from DraftKings to place a firm bid. 

In addition, the group said it would continue to recommend shareholders vote in favour of the agreed sale to Fanatics while it considers the DraftKings proposal. A vote on the Fanatics deal will take place on 30 June at an extraordinary general meeting.

PointsBet also addressed allegations that DraftKings had only put forward a proposal to disrupt the process with Fanatics. The group said that it believed DraftKings had acted in “good faith” when submitting its proposition.

“Hell or high water”

In a letter to DraftKings’ CEO Jason Robins, PointsBet’s non-executive chairman Brett Paton set out certain expectations surrounding the proposal. Paton said PointsBet would conduct due diligence and requested DraftKings do the same.

Paton said PointsBet would require written confirmation of DraftKings’ position on funding the cash burn of the US. He added that the FBG deal caps PointsBet’s cash burn at $21.0m on 1 July.

In addition, Paton said PointsBet would hold DraftKings to a “hell or high water” standard in regard to anti-trust clearances.

Q1 struggles at PointsBet

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.

This came on the back of 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 FY23.

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.

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