The board of PointsBet announced Sunday evening that it will move forward exploring a last-minute offer by DraftKings, while continuing to recommend a Fanatics bid — for now.
The Australian company issued a press release announcing it will engage DraftKings on its $195 million offer to purchase PointsBet‘s US assets. Because that offer is non-binding, though, PointsBet’s board continues to recommend its shareholders approve the earlier Fanatics offer of $150 million, pending the final outcome of the DraftKings negotiations.
The Directors of PointsBet have considered the DraftKings Proposal; and acting in good faith, have determined (after consultation with the Company’s financial and legal advisers) that the DraftKings Proposal could reasonably be expected to lead to a Superior Proposal (as that term is summarised in the Company’s ASX release dated 26 May 2023)
PointsBet stock bounced upward Monday In Australia on slightly higher than average trading volume.
What’s next for DraftKings, PointsBet
PointsBet also released a letter sent to DraftKings CEO Jason Robins outlining next steps for the companies to engage. Most of the requests appeared standard for a major M&A transaction, especially one between competitors:
- Non-disclosure agreement (NDA)
- Clean team for facilitating information exchange
- Virtual data room for due diligence
- “Hell or high water” provision, as detailed:
In light of the anticipated heightened scrutiny of an acquisition of PointsBet by DraftKings, as compared to the FBG Transaction, please provide written confirmation that DraftKings will assume the risk of delay and/or denial of antitrust approvals, as we intend to hold DraftKings to a “hell or high water” standard with respect to antitrust clearances.
Timeline for DraftKings to complete offer
PointsBet set a June 27 deadline for DraftKings to send a firm offer, running parallel to the due diligence process. That quick turnaround is necessary because shareholders of PointsBet are scheduled to vote on the Fanatics offer on June 30.
Eight of the top 10 PointsBet shareholders previously recommended accepting the Fanatics offer.
However, that alignment occurred prior to the emergence of a higher bid by DraftKings. The current second-place operator in market share, DraftKings could muddy the path for Fanatics to enter the US landscape by outbidding billionaire owner Michael Rubin.
Why Fanatics wants to buy PointsBet
PointsBet struggled to gain traction in the US sports betting market after debuting in 2018. The company viewed its Australian business as proof of concept that it could succeed in the United States, but better-capitalized operators with American footholds including FanDuel kept PointsBet in low single-digit market share.
Flush with cash from its apparel business to fund its betting aspirations, Fanatics began staffing its operation in the past couple of years. In 2022, Fanatics purchased Amelco source code to build its platform but CEO Matt King said last month that its engineers changed that code to where it is “hardly recognizable.”
With that base in place, Fanatics views a PointsBet purchase as primarily about market-access costs, King said.
“What we’re really saving by doing the PointsBet deal is there were upfront license fees that PointsBet had already paid, that if we went into those markets as a second-over, we were going to have to pay them again. So we were really able to save tens of millions of dollars worth of upfront license fees by leveraging PointsBet’s footprint versus going at it with a new footprint.”
