Fanatics declined to comment on a report that it “secretly held merger” talks with DraftKings two years ago.
According to two unnamed sources in a New York Post report, in early 2021, DraftKings and Fanatics were in “deep talks” on a 50-50 merger with each company valued at $24 billion. The report comes a week after DraftKings revealed it was making a late $195 million bid to purchase PointsBet‘s US assets, topping a $150 million proposal from Fanatics made about a month earlier.
DraftKings did not immediately respond to LSR’s request for comment. Fanatics declined to comment when reached.
DKNG stock fell nearly two percentage points to $25.13 a share just after the story posted on Friday.
History of DraftKings M&A
This would not be the first stunted merger between DraftKings and a rival.
In 2017, a merger between FanDuel and DraftKings fell apart after the Federal Trade Commission sued to block what they said would put more than 90% of the fantasy sports market in one company’s hands. The companies agreed to terminate the agreement about a month after the lawsuit. Today, they combine for over 60% of the US online sports betting market.
In a case more similar to the current bidding war over PointsBet, in 2021, DraftKings made a $22 billion offer to buy Entain, doubling a prior bid from MGM Resorts, which splits sports betting app BetMGM alongside Entain. The UK-based gaming company ultimately rejected the proposal, which would have created one of the world’s largest gaming companies.
Report: Robins accused of ‘grudge’
By trying to acquire Entain, DraftKings CEO Jason Robins aimed to gain access to Entain’s technology, customer base, and market access. Some say that is opposite reasoning behind its PointsBet bid.
Robins has “held a grudge [against Fanatics] ever since” talks with Fanatics dematerialized, an anonymous sports betting executive told the New York Post, adding “Jason was stopped and now he is returning the favor.”
In a statement to the Post, DraftKings dismissed those claims, saying the bid is centered around “significant synergies and financial rational” along with product and technological capabilities and “to suggest that there is an ulterior motive that is personal and not business related is irresponsible and not grounded in reality.”
A DraftKings-Fanatics purchase would likely block PointsBet from New York, Michigan, New Jersey and Virginia markets due to their caps on available licenses. It would also cost Fanatics an extra $20 million to launch online betting in Illinois.
PointsBet, Fanatics, DraftKings drama
PointsBet announced it would accept Fanatics’ offer a few weeks after CEO Sam Swanell confirmed it was looking for a buyer. Then came DraftKings.
It swooped in with a surprise $195 million bid to buy PointsBet about a month later. Unlike the retail clothing company-turned sportsbook, DraftKings already has market access in almost every state with legal online sports betting and has invested millions into its gaming technology stack.
The rival bid turned on its head what many considered a below-expected purchase price for Fanatics, which by all accounts would speed up its online betting rollout by absorbing PointsBet’s technology and state licenses.
DraftKings’ proposal is non-binding, which means there is no guarantee it will negotiate and execute a purchase, as the PointsBet board has pointed out. It is set to vote on Fanatics’ offer to buy PointsBet US during a shareholder meeting on June 30, with a June 27 deadline looming for DraftKings to firm up its offer.
