DraftKings ups the ante in bid for PointsBet

DraftKings ups the ante in bid for PointsBet.

As if it was sitting at a gaming table in Las Vegas, this morning DraftKings in a sense said ‘I raise. I’m all-in’ as it submitted a $195 million offer for the U.S. assets of PointsBet.

The all-cash offer not only shows the Massachusetts-based company’s desire to increase its stake in the sports-betting industry, but it also, in the interim at least, slows down Fanatics’ previous $150 million offer that it made last month.

“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 USA's business,” said Jason Robbins, DraftKings’ CEO, in a statement. “We believe DraftKings is uniquely positioned to submit this superior proposal due to our scale and corresponding ability to generate meaningful synergies from the acquisition.”

“We expect this transaction to increase our Adjusted EBITDA potential in 2025 and beyond and not impact our expectations of achieving positive Adjusted EBITDA in 2024,” said Jason Park, DraftKings’ Chief Financial Officer, in a statement. “We are excited about the potential synergies available by acquiring PointsBet’s U.S. business, including offering our customers interesting new bet types and accelerating our roadmap of bringing in-house more of our mobile sports betting technology.”

According to the DraftKings’ statement, the key elements of the indicative offer and proposed transaction are as follows:

1. Transaction Perimeter and Structure: We propose to acquire the U.S. Business under terms and conditions (other than the more attractive proposed consideration) that are substantially consistent with your Existing Agreement with Fanatics, as described in Annexure A of your May 15, 2023 press release.

2 Purchase Price and Consideration: We are offering to acquire the U.S. Business for USD $195 million in cash, on a debt-free and cash-free basis. Our Indicative Offer represents a 30% premium to Fanatics’ proposal of USD $150 million under the Existing Agreement.

3. Financing: The Proposed Transaction will not be subject to any financing condition, as DraftKings would complete the Proposed Transaction using cash from its balance sheet and does not need to raise any additional capital.

4. Required Approvals and Timeline to Closing: DraftKings expects that customary regulatory approvals, including the approval of gaming regulators in relevant U.S. jurisdictions, will be required in connection with the Proposed Transaction. As a licensed entity in all of the jurisdictions in which you operate the U.S. Business, we believe that we are uniquely positioned to obtain the requisite regulatory approvals on a more expedient timeframe than under your Existing Agreement with Fanatics. This higher level of deal certainty and speed to completion will enable PointsBet to return capital to its shareholders more quickly, which represents another reason that our Indicative Offer is superior to your Existing Agreement with Fanatics.

5. Internal DraftKings Approvals and Conditions: Our Indicative Offer has the full support of the highest levels of our organization. Our Transaction Committee and executive leadership team have been informed of this Indicative Offer and are enthusiastically supportive. However, as is customary, DraftKings’ entry into definitive agreements will be subject to the satisfactory completion of our reasonable due diligence, the negotiation of mutually acceptable transaction documentation and final internal approvals.

6. Due Diligence; Timeline to Signing a Definitive Agreement: Given the due diligence work already performed based on publicly available information, we are prepared to move forward quickly and efficiently with a targeted due diligence process. Subject to prompt access to management and requested information, we are confident that due diligence could be completed and definitive agreements executed in approximately three weeks.

PointsBet’s board has agreed to the Fanatics’ bid, but the official vote isn’t scheduled to take place until Friday, 30 June.

“We are skeptical of the DraftKings proposal which seems like a desperate move to slow down Fanatics and PointsBet from completing a deal,” said Michael Rubin, Fanatics CEO, in a statement. “The purchase price and other financial commitments will total more than $500 million, so they are using the majority of their projected year-end cash just to try to block us.”

In a note to its investors, PointsBet said that it will consider DraftKings’ offer, but “subject to the outcome of the review being undertaken of the DraftKings proposal, the board continues to recommend that shareholders vote in favor of the [Fanatics] transaction” at the end of the month meeting.