DraftKings, a prominent player in the sports betting industry, has recently made a bold move by submitting a proposal to acquire the US division of PointsBet Holdings, known as PointsBet US, for a staggering sum of $195.0 million. This unsolicited non-binding indicative proposal, tabled on June 16, outlines DraftKings’ intention to purchase the business on a debt-free, cash-free basis, without any financing conditions.
PointsBet, the target of this acquisition bid, has confirmed that its board will carefully assess the proposal. It is important to note that the proposal does not constitute a binding offer or commitment from DraftKings to proceed with a firm bid at this stage. The timeline for reaching a decision on the matter has not been specified by PointsBet.
It is worth mentioning that this offer from DraftKings comes on the heels of PointsBet’s agreement last month with the Fanatics Betting and Gaming (FBG) arm of Fanatics to acquire a different division. The FBG proposal is valued at $150.0 million and would allow PointsBet to retain its Canadian and Australian business and operations while continuing to be listed on the Australian Stock Exchange. Furthermore, the FBG offer includes PointsBet retaining its proprietary sports wagering, racing, and iGaming platform, along with a royalty-free license to utilize Banach technology assets. PointsBet would retain its teams in Australia, Canada, and India, as well as its technologists, traders, and quants based in Australia. The deal also entails PointsBet providing services to FBG prior to the deal’s closure, with reimbursement for the associated costs.
In considering the DraftKings proposal, PointsBet’s board will evaluate whether it presents superior terms compared to the already-agreed FBG deal. The assessment will involve weighing the value to shareholders and determining if the new proposal offers more favorable terms. Additionally, PointsBet will consider the feasibility of completing the DraftKings proposal in a timely and certain manner. Despite this ongoing review, PointsBet’s board continues to recommend that shareholders vote in favor of the FBG transaction. A vote on the FBG deal was scheduled to take place at a shareholder meeting on June 30.
In the context of recent developments, it is worth noting that PointsBet reported a 39% year-on-year increase in revenue to AU$106.6 million in the first quarter. While the Australian arm experienced a slight dip of 3% to $50.7 million compared to the previous year, the growth was primarily driven by PointsBet’s expansion in its North American operations. Revenue from these operations saw a significant surge of 103% year-on-year, reaching $49.8 million. The company’s Canadian business also witnessed rapid growth, expanding by 21% on a quarter-on-quarter basis to $6.1 million.
Despite the revenue growth, PointsBet anticipates an EBITDA loss between $77.0 million and $82.0 million for the second half of the fiscal year. To address these challenges and drive the business toward profitability, the company has implemented cost-cutting measures while expecting a cash outflow, including player cash movements, to be approximately 30% lower than in the first half of FY23.