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DraftKings’ $195 million offer to purchase the U.S. business of Australian-based online sports betting company PointsBet is one of the most interesting stories in the sports gaming industry. Fanatics announced their $150 million acquisition of PointsBet at the beginning of last month. DraftKings’ bid was 30% higher than Fanatics’, leaving some wondering about their motives.
The CEO of DraftKings, Jason Robins, believes in acquiring PointsBet to strengthen DraftKings’ presence in the sports gaming industry. Robins stated, “While we continue to focus on operating more efficiently and driving substantial organic revenue growth in the United States, we will also look to prudently capitalize on compelling opportunities at attractive valuations, as is the case with PointsBet’s U.S. business.”
Michael Rubin, the CEO of Fanatics, considers DraftKings’ offer as a way to intercept their proposed deal with PointsBet. Rubin told CNBC, “It’s a move to delay our ability to enter the market,” Rubin said. “I guess they are more concerned about us than I would have thought.” His skepticism has merit historically; this is not the first time DraftKings has tried to outbid a competitor; two years ago, DraftKings revealed its $22 billion plan to purchase U.K.-based Entain. Ultimately, Entain partnered with BetMGM as DraftKings backed out of the deal. ‘
Though DraftKings’ offer is non-binding, PointsBet is still considering the deal. In a statement released on Monday, PointsBet said: “In light of the anticipated heightened scrutiny of an acquisition of PointsBet by DraftKings, as compared to the (Fanatics) 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.”
Fanatics has come a long way from its start in apparel to growing and expanding into content, trading cards, memorabilia, and collectibles to enter the sports betting realm. DraftKings and FanDuel dominate a large chunk of the sports betting market share. If Fanatics can acquire PointsBet, it will allow them to expand into the 12 markets that PointsBet occupies. On the other hand, some speculate that if DraftKings were to purchase PointsBet, it would cost them more money to close, which may impact their hopes of turning a profit in 2024. Michael Rubin believes it would cost DraftKings $500 million to finalize the deal.
If Fanatics cannot finalize this deal with PointsBet, it could be a setback for them. Leading analysts believe the DraftKings offer may spark a bidding war for PointsBet. Joseph Stauff told CNBC, “underscores the cheap valuation implied by Fanatics’ $150 million bid and seems to suggest there’s likely to be some bidding competition.” PointBet is conducting a shareholder meeting vote on June 30 to favor the Fanatics acquisition. Further, this is a story to monitor closely; if PointsBet chooses to go with DraftKings over Fanatics, how will this impact other sportsbooks? Also, will there be a company that outbids both Fanatics and DraftKings? Stay tuned.
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