PointsBet plans to negotiate a proposed acquisition of its US business with DraftKings after determining that the offer may be “better” than Fanatics’ bid.
On 16th June, Pointbet received a unilateral non-binding offer to buy the US division from Draft Kings for $195m (£152m/€178.2m). admitted that
PointsBet said its board evaluated the proposal and would result in DraftKings acquiring the business on a debt-free, cash-free basis with no financing terms.
PointsBet is currently reviewing the proposal and said Draft Kings Draft Kings could lead to a “better” proposal than the one the Fanatics submitted last month. PointsBet added that it plans to work with DraftKings on its proposals in the future.
However, Pointbet reiterated that the DraftKings proposal does not constitute a binding offer or commitment from the DraftKings.
The group further said it would continue to encourage shareholders to vote in favor of the agreed sale to Fanatics while it considers DraftKings’ proposal. A vote on the contract with Fanatics will take place at the Extraordinary General Meeting on June 30.
The Draft Kings acted with integrity
PointsBet also noted specific allegations that DraftKings had simply put forward an offer to sabotage the process with Fanatics.
Fanatics CEO Michael Rubin said last week he was “skeptical” of the proposal. He added that this was a “desperate” attempt to slow progress on the deal between Fanatics and Pointbet.
Pointbet reached an agreement last month for Fanatics’ Fanatics Betting and Gaming (FBG) division to acquire the unit for $150 million.
If FBG’s first deal goes through, the company will be granted access to 12 states. These include major gaming and gaming centers such as New York, New Jersey, Pennsylvania and Michigan. However, if PointsBet chooses the DraftKings proposal, FBG will have to explore alternative routes into these and other markets.
However, when evaluating the proposal, Pointbet said it believed the Draft Kings had acted “in good faith” when submitting the proposal.
“Hell or high water?”
In a letter to DraftKings CEO Jason Robbins, PointBet non-executive chairman Brett Payton expressed certain expectations about the proposal. Payton said PointBet will conduct due diligence and asked Draft King to do the same.
“Considering that the Draft Kings are a major contender for point betting, it is our strong hope that the Draft Kings due diligence will be conducted by a clean team,” said Payton. “This requires agreeing to a clean team protocol before starting due diligence.
“For the sake of time, we recommend that DraftKings provide a clean team protocol that works best for your team. Make sure you agree with this approach.”
Payton also said Pointbet needs to confirm in writing the Draft Kings’ position on funding US cashburn. He added that the deal with FBG will cap PointBet’s cash burn at $21 million as of July 1.
Additionally, Payton said the point bet would keep the Draft Kings at “hell or high water” standards when it comes to antitrust clearance.
“Given the expected increased scrutiny of the Pointbet acquisition by DraftKings compared to the FBG transaction, we have confirmed in writing that DraftKings will assume the risk of delayed and/or denial of antitrust approval. please,” Peyton said.
“We will impose a ‘hell or high water’ standard on the Draft Kings for antitrust clearance.”
PointsBet’s first quarter loss increases
The DraftKings proposal came after Pointbet confirmed in April that the company was in talks with “several parties” regarding the sale of its North American division.
The company also announced that it had completed negotiations to sell its previously reported Australian business to a gaming venture backed by News Corp, which owns the Betr brand.
Nonetheless, Pointbet said it is continuing discussions with “other third parties” who have expressed interest in acquiring the business.
This was due to PointsBet recording revenue of A$106.6 million in the first quarter, up 39% year-on-year.
Growth was driven by expansion in North America, where revenue increased 103% year over year to $49.8 million. PointsBet’s Canadian business also experienced rapid growth during this period. It increased 21% sequentially to $6.1 million.
Nonetheless, the company said it expects an EBITDA loss of $77 million to $82 million in the second half of 2003.
In addition, we expect cash outflows, including player cash movements, to be approximately 30% lower than in the first half of 2023. Due to these pressures, the company has tried to cut costs to make the business more profitable.
