On 16 June, PointsBet confirmed it received an unsolicited non-binding indicative proposal from DraftKings to purchase is US division for $195.0m (£152.0m/€178.2m).
PointsBet said its board assess the proposal, which would see DraftKings buy the business on a debt-free, cash-free basis with no financing conditions.
Having now considered the proposal, PointsBet said DraftKings’ DraftKings could lead to a “superior” proposal than that put forward by Fanatics last month. PointsBet added that it will now engage with DraftKings on its proposals.
However, PointsBet reiterated the DraftKings proposal does not constitute a binding offer or commitment from DraftKings to place a firm bid.
In addition, the group said it would continue to recommend shareholders vote in favour of the agreed sale to Fanatics while it considers the DraftKings proposal. A vote on the Fanatics deal will take place on 30 June at an Extraordinary General Meeting.
DraftKings acted in good faith
PointsBet also addressed certain allegations that DraftKings had only put forward a proposal to disrupt the process with Fanatics.
Last week, Fanatics’ chief executive Michael Rubin said he was “sceptical” of the proposal. He added that it was a “desperate” attempt to slow progress on Fanatics’ own deal with PointsBet.
PointsBet last month reached an agreement for the Fanatics Betting and Gaming (FBG) arm of Fanatics to acquire the division for $150.0m.
Should FBG’s initial deal go through, it would grant the business access to 12 states. Among those are major betting and igaming hubs, such as New York, New Jersey, Pennsylvania and Michigan. But if PointsBet opts for the DraftKings proposal, FBG would need to seek other routes to these and other markets.
However, in assessing the offer, PointsBet said that it believed DraftKings had acted in “good faith” when submitting its proposition.
“Hell or high water”
In a letter to DraftKings’ CEO Jason Robins, PointsBet’s non-executive chairman Brett Paton set out certain expectations surrounding the proposal. Paton said PointsBet would conduct due diligence and requested DraftKings do the same.
“Given DraftKings is a key competitor of PointsBet, it’s our strong preference that DraftKings’ due diligence is conducted by a clean team,” Paton said. “This will require agreement of a clean team protocol prior to the commencement of due diligence.
“In the interest of time, we suggest that DraftKings provides a clean team protocol that best works for your team. Please confirm you are aligned with this approach.”
Paton also said that PointsBet would require written confirmation of DraftKings’ position on funding the cash burn of the US. He added that the FBG deal caps PointsBet’s cash burn at $21.0m on 1 July.
In addition, Paton said PointsBet would hold DraftKings to a “hell or high water” standard in regard to anti-trust clearances.
“In light of the anticipated heightened scrutiny of an acquisition of PointsBet by DraftKings, as compared to the FBG transaction, please provide written confirmation that DraftKings will assume the risk of delay and/or denial of antitrust approvals,” Paton said.
“We intend to hold DraftKings to a “hell or high water” standard with respect to antitrust clearances.”
Q1 losses mount for PointsBet
DraftKings’ proposal came after PointsBet in April confirmed that the business was in talks with “multiple parties” regarding the sale of its North American arm.
The company also said that it had terminated previously reported talks to sell its Australian business to the News Corp-backed gaming venture behind the Betr brand.
Despite this, PointsBet said it remained in discussions with “other third parties” who have expressed interest in acquiring the business.
This came on the back of a first quarter in which PointsBet posted a 39% year-on-year rise in revenue to AU$106.6m.
Expansion in North America drove growth, with revenue up 103% year-on-year to $49.8m. PointsBet’s Canadian business also experienced rapid growth over the period; growing 21% on a quarter-on-quarter basis to $6.1m.
Despite this, the company said it expects to make an EBITDA loss of between $77.0m and $82.0m for H2 FY3.
Additionally, the business expects cash outflow, including movements in player cash, to be approximately 30% lower than in H1 FY23. Due to these pressures, the company has attempted to cut costs in order to drive the business towards profitability.
Original article: https://igamingbusiness.com/strategy/ma/pointsbet-to-engage-with-draftkings-on-acquisition-proposal/
