The board of PointsBet said Sunday night that it will continue to endorse a Fanatics bid while looking into a last-minute offer from DraftKings.
The Australian business announced in a press release that it would work with DraftKings to accept its $195 million offer to buy the US assets of PointsBet. PointsBet’s board still urges shareholders to accept the earlier Fanatics offer of $150 million, notwithstanding the non-binding nature of that offer, awaiting the conclusion of the DraftKings discussions.
The Directors of PointsBet considered the DraftKings Proposal and, acting in good faith, determined that it could reasonably be expected to result in a Superior Proposal (as that term is defined in the Company’s ASX release dated 26 May 2023) after consulting with the Company’s financial and legal advisers.
On Monday in Australia, the price of PointsBet stock increased on somewhat greater than usual trading activity.
A letter from DraftKings CEO Jason Robins describing the next steps for the firms’ interaction was also made public by PointsBet. The majority of the requests were typical for a significant M&A deal, particularly one involving rival businesses:
Clean team non-disclosure agreement (NDA) for promoting information sharing:
“Hell or high water” provision for a virtual data room for due diligence, as described:
Please confirm in writing that DraftKings will assume the risk of delay and/or denial of antitrust approvals in light of the anticipated increased scrutiny of an acquisition of PointsBet by DraftKings, as compared to the FBG Transaction, as we intend to hold DraftKings to a “hell or high water” standard with respect to antitrust clearances.
Parallel to the due diligence procedure, PointsBet set a June 27 deadline for DraftKings to submit a concrete bid. Because PointsBet shareholders will vote on the Fanatics offer on June 30, a speedy turnaround is required.
The Fanatics deal was previously supported by eight of the top ten shareholders of PointsBet.
However, that alignment took place before DraftKings made a better offer. By outbidding its billionaire owner Michael Rubin, DraftKings, the second-place operator in market share, might make it difficult for Fanatics to enter the US market.
After making its debut in the US sports betting market in 2018, PointsBet found it difficult to establish traction. The company saw its operations in Australia as proof that it could be successful in the United States, but better-capitalized operators with American presences like FanDuel kept PointsBet’s market share in the low single digits.
In the past few years, Fanatics started staffing its operation since it had plenty of money from its garment company to support its betting ambitions. Fanatics bought the Amelco source code in 2022 to create its platform, but CEO Matt King revealed last month that the code was altered to the point where it is “barely recognizable.”
With that foundation established, King stated that Fanatics sees a PointsBet acquisition as essentially being about market-access fees.
“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.”
